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“A” (or Judgment) Rates. Rates that are not backed up by loss experience statistics. They are based on the judgment of the underwriter on an individual risk basis.

A&H, A&S. Accident and Health Insurance, Accident and Sickness Insurance. Once commonly used as generic designations for the entire field now called health insurance.

Abandonment. Relinquishing ownership of lost or damaged property by the insured to the insurance company so that a total loss may be claimed. This is prohibited in most types of property insurance.

Abandonment Clause or Condition. A clause that prohibits the abandonment of partially damaged property to the insurer in order to claim a total loss. The company may choose to acquire damaged property which can be sold for salvage and choose to pay a total loss, but the insured cannot insist that the insurer take possession of any property.

Absolute Assignment. Assignment by a policyowner of all control of and rights in the policy to a third party.

Absolute Beneficiary. See Irrevocable Beneficiary.

Absolute Liability. A liability that arises from extremely dangerous operations, such as the use of explosives (e.g., a contractor would almost certainly be liable for damages caused by vibrations of the earth following an explosive detonation). With absolute liability it is usually not necessary to establish that the operation is dangerous. See also Strict Liability.

Accelerated Benefits. Riders on life insurance policies that allow the policy’s death benefits to be used to offset expenses incurred in a convalescent or nursing home facility. Any living benefits paid by the insurance company reduce the remaining death benefit.

Accelerated Endowment. A dividend option allowing dividend accumulations to be applied to convert a life insurance policy into an endowment, or to shorten the endowment term.

Accelerated Option. A provision whereby an insured may use accumulated policy dividends and the cash value of a life insurance contract to pay up the policy or to mature it as an endowment.

Acceptance. Insurance acceptance occurs when an applicant for insurance receives the policy from the company and, in the case of general insurance, pays the premium. In life insurance, since the initial premium is often submitted with the application, issuance of the policy constitutes acceptance.

Acceptance of the Risk. Once all the underwriting information has been reviewed, an insurance company makes a decision about the acceptance of the risk. Most applicants are classified as standard risks. Occasionally, an applicant for disability income will be classified as a substandard risk.

Accident and Health Insurance (A&H). An older name for health insurance. See Health Insurance.

Accident and Sickness Insurance (A&S). An older name for health insurance. See Health Insurance.

Accident Frequency. The rate of the occurrence of accidents, often expressed in terms of the number of accidents over a period of time. It is one method used for measuring the effectiveness of loss prevention services. Contrast with Accident Severity.

Accident Insurance. Insurance against loss by accidental bodily injury to the insured.

Accident Only Insurance. Insurance that provides coverage for injury from accident, and excludes sickness. Benefits may be paid for all or any of the following: death, disability, dismemberment or hospital and medical expenses.

Accident Prevention. See Loss Prevention Service.

Accident Severity. A measure of the severity or seriousness of losses, rather than the number of losses. It is measured in terms of time lost from work rather than the number of individual accidents. It is another way of measuring the effectiveness of loss prevention services. Contrast with Accident Frequency.

Accident Year Experience. Measures premiums and losses relating to accidents which occurred during a 12-month period.

Accident. An unintended and unforeseen event, which occurs suddenly and at a definite place, resulting in bodily injury. An accident is also any injury caused by accidental means—the cause was accidental versus intentional. If the cause is accidental, then benefits are payable. If it is intentional, then the claim would be denied. See also Occurrence and Accidental Bodily Injury.

Accidental Bodily Injury. An injury to the body (the result of an accident), of external origin, unintentional and unforeseen by the injured person. Contrast with Accidental Means.

Accidental Death and Dismemberment (AD&D). A policy or a provision in a disability income policy which pays either a specified amount or a multiple of the weekly disability benefit if the insured dies, loses his or her sight, or loses two limbs as the result of an accident. A lesser amount is payable for the loss of one eye, arm, leg, hand or foot. Although technically a health insurance product, AD&D coverage is frequently provided as part of an individual or group life insurance contract.

Accidental Death Benefit. An extra benefit which generally equals the face of the contract or principal sum, payable in addition to other benefits in the event of death as the result of an accident. See also Double Indemnity and Multiple Indemnity.

Accidental Death Insurance. A form that provides payment if the death of the insured results from an accident. Often combined with dismemberment insurance in a form called accidental death and dismemberment.

Accidental Means. Unexpected or undesigned cause of an accidental bodily injury. The mishap itself must be accidental, not just the resulting injury, (e.g., a person chopping wood: If the axe slipped out of his hand and cut his foot, it would have been accidental means. However, if his finger got in the way of the axe, it would not have been).

Accommodation Line. Business accepted from an agent or broker which would normally be rejected according to strict underwriting standards but which is accepted because of the overall profitability of the agent’s or customer’s other business, (e.g., an insurer might accept coverage on property that would not normally meet its underwriting standards, if the other lines of insurance which it carries for the customer were profitable.

Account Current. A monthly financial statement provided to an agent by an insurer showing premiums written, cancellations endorsements and commissions.

Accounts Receivable Insurance. Insurance against loss that occurs when an insured is unable to collect outstanding accounts because of damage to or destruction of the accounts receivable records by a peril covered in the policy.

Accredited Service. All service, by an employee, recognized under a pension plan as being allowable or creditable in calculating the benefits due.

Accrete. A Medicare term which means the process of adding new members to a health plan.

Accrued Benefit. The amount of retirement benefit accumulated by a participating employee.

Accrued Liability. The amount of money needed to offset accumulated benefits under a retirement plan. Accrued liability equals the difference between the present value of the future benefits and the present value of future contributions.

Accumulated Actuarial Benefit. The sum of benefits assigned to credited service before a specified date, and which is determined pursuant to the actuarial valuation method in use.

Accumulated Earnings Tax. A tax penalty imposed on corporate earnings that are retained by the corporation for non-business related needs.

Accumulated Plan Benefit. That portion of a retirement benefit that is attributable pursuant to the plan to the participant’s period of credited service before a specified date.

Accumulation at Interest. A dividend option where interest is paid on accumulated dividends and compounded annually at a guaranteed minimum interest rate.

Accumulation Period. The period of time, prior to retirement, during which an annuitant is making payments or investments in an annuity. Such payments will accumulate on a tax deferred basis.

Accumulation Units. These are issued to owners of variable annuities during the accumulation period, as evidence of the annuitant’s participation in the separate account.

Accumulation Value. A term used in universal life policies to describe the total of all premiums paid and interest credited to the account before deductions for any expenses, loans or surrenders.

Accumulations (or Accumulation Benefits). Percentage additions to policy benefits when the contract is continuously renewed.

Acquired Immunodeficiency Syndrome (AIDS). An infectious and incurable disease, commonly referred to as AIDS, which is caused by the human immunodeficiency virus, or HIV.

Acquired Locations. Locations acquired after inception of the coverage and during the coverage period.

Acquisition Cost. Expenses incurred by an insurer or reinsurance company that are directly related to putting a business on the books (acquiring a customer), including clerical work, medical examiners fees, inspection costs, etc. The largest portion of this cost is usually the agent’s or sales representative’s commission or bonus.

Act of God. An event arising out of natural causes (with no human intervention) which could not have been prevented by reasonable care or foresight (e.g., flood, lightning and earthquake).

Action. A lawsuit involving the right of one party to recover from another person in a court of law.

Active Malfunction. When a product, instead of bringing a benefit to the user, actually damages the user’s property (e.g., if a bug killer, which is intended to protect a crop, damages the crop instead).

Actively-at-Work. Most group health insurance policies state that if an employee is not actively at work when the policy goes into effect, the coverage will not begin until the employee does return to work.

Activities of Daily Living (ADL). Everyday living functions and activities performed by individuals without assistance, including moving about, dressing, attending to personal hygiene and eating.

Activities of Daily Living (ADL) Standards. Standards used to assess the ability of a person to live independently, measured by the ability to perform unaided such activities as eating, bathing, toiletry, dressing and walking. Sometimes used to measure or define eligibility for long-term care.

Actual Cash Value (ACV). An amount equal to the replacement cost of lost or damaged property at the time of loss, less depreciation. With regard to buildings, there is a tendency for the ACV to closely parallel the market value of the property. If there is a covered loss to the insured dwelling, the insurance company will pay either the depreciated value of the damaged dwelling at the time of loss or the cost of repairing the property with like construction, but only up to the policy’s limit of liability. ACV also refers to the maximum limit of auto insurance coverage. The insurer will usually only pay the ACV or the cost to repair or replace the damaged or stolen property, whichever is less. Depreciation and the condition of the vehicle are also considered in determining the ACV. See also Market Value.

Actual Charge. The actual amount charged by a physician for medical services rendered.

Actual Total Loss. See Total Loss.

Actuarial. Having to do with insurance mathematics or actuaries—people hired by insurance companies to create formulas and tables that calculate the present value of future payments and risks related to those payments.

Actuarial Equivalence. Two different series of payments or values are in actuarial equivalence when they have an equal actuarial present value under a given set of actuarial assumptions. See Actuarial Present Value.

Actuarial Experience Gain or Loss. The effect on an actuarial value of deviations between the past events that would have occurred according to the actuarial assumptions and those which actually occurred.

Actuarial Present Value. The single amount as of a given evaluation date that results from applying actuarial assumptions to an amount or series of amounts payable or receivable at various times; with the amount(s) adjusted to reflect expected changes from the valuation date to the date of expected payment or receipt by reason of expected salary changes, cost of living adjustments, etc.; and adjusted to reflect the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as for death, disability, withdrawal or retirement) between the valuation date and the expected date of payment or receipt.

Actuarial Valuation Method. A procedure, using actuarial assumptions, for measuring the expected value of benefits and assigning such value to time periods. Also called actuarial analysis.

Actuarially Sound. When the amount of money in a pension fund, and the current level of contributions to the fund, are sufficient to meet the liabilities that have already accrued and that are accruing on a current basis.

Actuary. A specialist trained in mathematics, statistics and accounting who is responsible for rate, reserve and dividend calculations as well as other statistical studies.

Acute Care. Skilled, medically necessary care provided by medical and nursing personnel in order to restore a person to good health.

AD&D. See Accidental Death and Dismemberment Insurance.

Added Expense. Extra expenses incurred relative to a disabling injury or sickness, including additional medication, doctor’s bills, the need for prosthetic appliances, such as braces, and possible hospital bills that are not fully covered by hospitalization insurance.

Additional Coverages. Limited amounts of coverage for specific types of losses or expenses that are provided in addition to the major coverages (e.g., personal liability coverage provides three kinds of insurance in addition to the stated limits of liability: claim expenses, first aid to others and damage to the property of others).

Additional Drug Benefit List. Prescription drugs listed as commonly prescribed by physicians for patients’ long-term use. Subject to review and change by the health plan involved. Also called drug maintenance list.

Additional Indemnity Riders. These riders provide additional amounts of indemnity for short periods of time, such as six or 12 months. The primary purpose of these riders is to supplement or coordinate with other disability benefits, such as Social Security or group disability benefits.

Additional Insured. A person other than the named insured who is protected under the terms of the contract. Usually, additional insureds are added by endorsement or referred to in the wording of the definition of “insured” in the policy. See Named Insured.

Additional Living Expense Insurance. A contract to reimburse the insured for increased living costs when loss of property forces the insured to maintain temporary residence elsewhere, including the costs for a hotel or motel, for restaurant meals or for using a laundromat. The term extra expense insurance refers to additional expenses incurred by businesses. See also Loss of Use.

Additional Living Expenses. Any necessary increase in living expenses—such as rent for alternative housing —incurred so that the household can maintain its normal standard of living.

Additional Monthly Benefit (AMB) Rider. A rider added to a disability income policy to provide additional benefits during the first year of a claim while the insured is waiting for Social Security benefits to begin. Also used to complement other disability income sources, such as short-term group disability benefits provided through the employer. Also called a Social Security Rider.

Additional Premium. When endorsements are added to a policy, there is almost always an additional premium (cost) charged. See Premium.

Additur. A situation where the court increases a previous jury award. Compare to Remittitur.

Adhesion. A characteristic of a unilateral contract that is offered on a “take it or leave it” basis. Most insurance policies are contracts of “adhesion,” because the terms are drawn up by the insurer and the insured simply “adheres” to the policy provisions. For this reason ambiguous provisions are often interpreted by courts in favor of the insured. Contrast with Manuscript Policy.

Adjustable Life. A form of life insurance that allows changes on the policy face amount, the amount of premium, period of protection and the length of the premium payment period. See also Flexible Premium Adjustable Life Insurance Policy.

Adjustable Premium. The right of an insurer to change the premium rate on classes of insureds, or blocks of business at the time of policy renewal.

Adjusted Community Rating (ACR). Community rating adjusted by factors specific to a particular group. Also known as factored rating.

Adjusted Gross Estate. In the calculation of federal estate taxes, it is equal to the gross estate less specific deductions.

Adjusted Net Worth. The capital, surplus and voluntary reserves of an insurer, plus an estimated value for business on the books and unrealized capital gains, less the potential income tax on such gains.

Adjuster. A representative of the insurer who seeks to determine the extent of the firm’s liability for loss when a claim is submitted. Same as Claim Representative.

Adjuster, Average. See Average Adjuster.

Adjuster, Independent. See Independent Adjuster.

Adjuster, Public. See Public Adjuster.

Adjustment Bureau. A firm organized to provide adjustment services to insurers not wishing to create their own claims division.

ADL. See Activities of Daily Living Standards.

Administration Bond. A bond furnished by the executor or administrator of an estate. It guarantees that the estate will be settled in accordance with the terms of the will, or, if there is no will, in accordance with the law. It guarantees the fidelity of the executor or administrator.

Administration Expenses. Costs incurred in conducting an insurance operation other than loss adjustment expenses, acquisition costs, and investment expenses.

Administrative Services Only. Services provided by an insurer, such as providing claim forms and processing claims, when the insurer is not the party funding the loss payments. See also Self Funded Plan.

Administrator. A person appointed by a court as a fiduciary to settle the financial affairs and the estate of a deceased person. Compare to Executor.

Admiralty Liability. All laws relating to liability resulting from any kind of maritime activity. This includes common law and statutory law, such as the Jones’ Act and the Seamen’s Remedies.

Admiralty Proceeding. A type of proceeding involving questions of maritime suit. Any insurance claims involving ocean marine insurance would generally be settled by an admiralty court.

Admissions/1,000. The number of hospital admissions for each 1,000 members of the health plan.

Admits. The number of admissions to a hospital (including outpatient and inpatient facilities).

Admitted (or Allowed) Assets. Assets whose values are permitted by state law to be included in the annual statement of the insurer.

Admitted Company. An insurance company authorized and licensed to do business in a given state.

Admitted Liability. Coverage for guests in an aircraft. In the event of an accident, with this coverage guests can recover without having to go through a determination as to whether or not the insured was liable. It is written with a limit per seat in the aircraft.

Adult Day Care. An optional group program for functionally impaired adults, designed to meet health, social and functional needs in a setting away from home. Available under LTC insurance.

Advance Funding. Periodically setting aside a predetermined sum of money to fund future retirement benefits of a pension plan.

Advance Payment. Premiums paid in advance of the current policy period, including the amount tendered with an application for life insurance.

Advance Premium. See Deposit Premium.

Adverse Selection. The tendency of poorer than average risks to buy and maintain insurance. Adverse selection occurs when insureds select only those coverages that are most likely to have losses.

Adverse Underwriting Decision. Any decision involving individually underwritten coverages resulting in termination of existing insurance, declination of an application or writing the coverage only at higher rates. For property and casualty insurance, it also includes placing the coverage with a residual market mechanism or unauthorized insurer.

Advertising Injury. Injury arising out of libel or slander, violation of the right to privacy, misappropriation of advertising ideas or infringement of copyright, title or slogan committed in the course of advertising goods, products or services. Contrast with Personal Injury.

Affiant. The person who executes an affidavit.

Affidavit. A written or printed declaration or statement of fact, made voluntarily and confirmed by the oath or affirmation of the party making it, and taken before an officer having authority to administer such oath.

Affiliated Companies. Insurers linked together through common stock ownership or through interlocking directorates.

Affirmed. When an appellate court declares that a judgment, decree or order is valid and right, and must stand as rendered in the lower court.

After Charge. A charge often included in fire rates for commercial buildings. It is usually added for conditions that can be corrected by an insured, such as failure to have the proper fire extinguishers.

Aftercare. Individualized patient services required after hospitalization or rehabilitation.

Age Change. The date on which a person’s age, for insurance purposes, changes. In most life policies this is the date midway between the insured’s natural birth dates. Health insurers frequently use the age of the previous birth date for rate determinations. On the date of age change, a person’s age may change to that of the last birth date, the nearer birth date or the next birth date, depending upon the way in which the rating structure has been established by that particular insurer.

Age Limits. The ages below which or above which an insurer will not write certain forms of insurance or above which it will not continue a policy presently in force.

Age/Sex Factor. Compares the age and sex risk of medical costs of one group relative to another. An age/sex factor above 1.00 indicates higher than average risk of medical costs due to that factor. Conversely, a factor below 1.00 indicates a lower than average risk. This measurement is used in underwriting.

Age/Sex Rates (ASR). Separate rates are established for each grouping of age and sex categories. Preferred over single and family rating because the rates and premiums automatically reflect changes in age and sex content of the group. Also called table rates.

Agency Company. An insurance company that produces business through an agency network. Contrast with Direct Writer.

Agency Contract (or Agreement). A document that establishes the legal relationship between an agent and an insurer.

Agency Plant. The total force of agents representing an insurer.

Agency System. See Independent Agency System.

Agency. (1) An insurance sales office which is directed by a general agent, manager, independent agent or company manager. (2) When one person acts on behalf of another person, an agency is created with the first person being the agent and the second person being the principal. The principal generally can be held responsible for acts of its agents.

Agent. One who solicits, negotiates or effects contracts of insurance on behalf of an insurer. The agent’s right to exercise various functions, authority and obligations, and the obligations of the insurer to the agent are subject to the agency contract with the insurer, to statutory law and to common law.

Agent’s Appointment. Official authorization from an insurance company granting an agent the authority to act as its agent. In most states, agents must be appointed by at least one insurer in addition to being licensed by the state.

Agent’s Authority. The authority and power granted to an agent by the agency contract. The agent also has additional power under the legal concept of apparent agency. See Presumption of Agency.

Agent’s Balance. A periodic statement of the sums due and owed to an agent under contract.

Agent’s Commission. What an insurance company pays its agents for placing insurance. Commission is usually a percentage of the premium for the policy. See also Commission.

Agent, General. See General Agent.

Agent, Independent. See Independent Agent.

Agent’s License. A certificate of authority from the state which permits the agent to conduct business.

Agent, Policywriting. See Policywriting Agent.

Agent’s Qualification Laws. Education, experience and other requirements imposed by the state upon persons desiring to be licensed as agents.

Agent, Recording. See Recording Agent.

Agent, Special. See Special Agent.

Agent, State. See State Agent.

Aggregate Excess of Loss Reinsurance. A form of excess of loss reinsurance that indemnifies the ceding company against the amount by which its losses incurred during a specific period, usually 12 months, exceed either: a predetermined dollar amount; or a percentage of the company’s premiums (loss ratio) for that period. Commonly referred to as stop loss reinsurance or excess of loss ratio reinsurance.

Aggregate Funding Method. Accumulating money for a pension plan by actuarially determining the present value of all future benefit payments, deducting whatever funds may be on hand with the trustee or insurance company and distributing the balance as a cost over the future.

Aggregate Indemnity. A maximum dollar amount that may be collected by the claimant for any disability, for any period of disability or under the policy as a whole.

Aggregate Limit. Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents may occur.

Aggregate Products Liability Limit. Indicates the amount of money that the insurer will pay during the term of a policy for all products liability claims that it covers.

Agreed Amount Clause. Under this clause, the insured and the insurer agree that the amount of insurance carried will automatically satisfy the coinsurance clause. This eliminates the necessity of determining whether or not the amount carried is equal to the stated percentage of the actual cash value indicated in the coinsurance clause.

Agreement. One element of a legal contract. When an offer made by one party has been accepted by the other, with mutual understanding by both, an agreement exists.

AIA. See American Insurance Association.

AIDS Related Complex (ARC). A variety of symptoms and opportunistic infections and conditions which frequently manifest themselves in patients suffering from AIDS, or acquired immunodeficiency syndrome, which is caused by the human immunodeficiency virus.

AIDS. See Acquired Immunodeficiency Syndrome.

Alcoholic Beverage Control Laws. See Dram Shop Laws.

Alcoholic Beverage Liability Insurance. See Dram Shop Liability Insurance.

Aleatory Contract. A contract in which the number of dollars to be given up by each party is not equal. Insurance contracts are of this type, as the policyholder pays a premium and may collect nothing from the insurer or may collect a great deal more than the amount of the premium if a loss occurs.

Alien Insurer. An insurer formed under the laws of a country other than the U.S. A U.S. company selling in other countries is also an alien insurer.

Alienated. Property to which an insured no longer owns or holds title. Generally, a public liability policy covers the insured’s liability for premises alienated by him or her.

All or Nothing Rider. A rider to a health insurance policy that provides additional benefits in the event no benefits are payable under Social Security.

All Risk Insurance. Special coverage forms. See Open Peril. Contrast with Named Perils.

Alliance of American Insurers (AAI). An association of insurance companies working together in the following areas of common interest: 1) government affairs affecting insurance; 2) education of the employees of member companies; 3) loss prevention; and 4) other insurance activities.

Allied Health Personnel. Health personnel who perform duties which would otherwise have to be performed by physicians, optometrists, dentists, podiatrists, nurses and chiropractors. Also called paramedical personnel.

Allied Lines. Various insurance coverages for additional types of losses, and against loss by additional perils, which are closely associated with and usually sold with fire insurance. Includes coverage against loss by perils other than fire, coverage for sprinkler leakage damage and business interruption coverage. The fire insurance field consists of coverages for “fire and allied lines.”

Allocated Benefits. Payments authorized for specific purposes with a maximum specified for each. In hospital policies, for instance, there may be scheduled benefits for X-rays, drugs, dressings, etc.

Allocated Funds. Qualified plan funds which are identified in the name of specific plan participants.

Allocation Formula. In a profit-sharing trust, the formula under which the employer’s contributions are credited to the employees.

Allowable Charge. The lesser of the actual charge, the customary charge and the prevailing charge. It is the amount on which Medicare will base its Part B payment. The Medicare allowable amount is basically Medicare’s version of reasonable and customary charges (e.g., if a doctor charges a Medicare patient $600 for certain services, Medicare may only approve a portion of the benefits.)

Allowable Costs. Charges which qualify as covered expenses.

Allowed Assets. See Admitted Assets.

Alternative Delivery Systems. Systems which cover health care costs, other than on the usual feefor-service basis. Includes HMOs, IPAs, PPOs.

Alzheimer’s Disease. A progressive, irreversible disease characterized by degeneration of the brain cells and severe loss of memory causing the individual to become dysfunctional and dependent upon others for basic living needs.

Ambiguity. Terms or words in an insurance policy which make the meaning unclear or which can be interpreted in more than one way. The general rule of law is that any ambiguity in the policy is construed against the insurer and in favor of the insured. This is because the contract is one of adhesion; that is, the insured must adhere to what the insurer has written. If the insurer does not make its contract clear, it is responsible.

Ambulatory Care. Outpatient treatment that does not require hospitalization.

Ambulatory Setting. Surgery centers, clinics or other outpatient facilities which provide health care on an outpatient basis.

Amendment. A formal document that corrects or revises an insurance master policy. See also Endorsement and Rider.

American Academy of Actuaries. A society concerned with the development of education and standards in the actuarial field. Members may use the designation MAAA (Member, American Academy of Actuaries).

American Agency System. See Independent Agency System.

American Association of Insurance Services (AAIS). An association of insurance companies performing various technical functions for its members and subscribers. Licensed to operate in all states, the District of Columbia and the Commonwealth of Puerto Rico, AAIS offers program services, files rates, rules and forms on behalf of member and subscriber companies, acts as an official statistical agent and offers a variety of professional services for its member companies.

American College. An educational institution within the life insurance business. It confers the Chartered Life Underwriter designation and is concerned with continuing agents’ training and with research and publication in areas related to the life insurance business. It also sponsors specialty life insurance courses and offers a college degree in financial services. Formerly known as the American College of Life Underwriters (ACLU).

American Council of Life Insurance, Inc. An association made up of several previously independent insurance groups that is concerned with legislative matters, intercompany communications and the exchange of information.

American Experience Table of Mortality. A statement of expected mortality rates based upon data accumulated in 1868 from a large number of insured persons. Widely used by life insurers until the 1950s to establish rates.

American Institute for Chartered Property and Casualty Underwriters, Inc. An insurance educational organization that establishes insurance standards and fosters educational work. Properly qualified individuals who pass a series of examinations given by this body receive the designation Chartered Property and Casualty Underwriter (CPCU).

American Insurance Association (AIA). The informational, educational, technical and legislative organization of the capital stock insurance companies in the property and liability fields. See Capital Stock.

American Lloyd’s. See Lloyd’s Association.

American Risk and Insurance Association. An association of insurance educators and others interested in insurance study and research.

Amortization. A method of spreading a fixed sum, together with accumulating interest, over a period of years.

Amortized Value. The value of bonds purchased by an insurance company that are eligible for amortization. For example, if a 10-year bond were purchased at $50 more than its face value, that $50 would be “amortized” or spread over the 10-year period. Each year the bonds would be valued at $5 less than the year before.

Amount at Risk. The difference between the face amount of a whole life insurance contract and the cash value which it has built up. The net amount at risk declines throughout the life of the contract, while the policy reserve increases along with the cash value. It is the amount the insurer would have to draw from its own funds rather than the policy reserve were the contract to become a death claim.

Amount Subject. The maximum amount which underwriters estimate can possibly be lost under the most unfavorable circumstances in any given loss, such as a fire or tornado. Contrast with Probable Maximum Loss.

Ancillary Benefits. Benefits for miscellaneous hospital charges.

Ancillary. Additional services (other than room and board charges) such as x-rays, anesthesia, lab work, etc. Fees charged for ancillary care such as x-rays and lab work. This term may also be used to describe the charge made by a pharmacy for prescriptions which exceed the health insurance plan’s maximum allowable cost (MAC).

Anniversary. See Policy Anniversary.

Annual (or Yearly) Renewable Term (ART). (1) term life insurance that may be renewed annually without evidence of insurability until a stated age. (2) A form of life, and sometimes health, reinsurance in which the reinsurer assumes only the mortality risk, which is usually calculated as the face amount of reinsurance minus the terminal reserve.

Annual Additions. The total of employer contributions, voluntary employee contributions and forfeited additions of terminated participants that equal the total annual contribution to a qualified retirement plan.

Annual Payment Annuity. An annuity which was purchased by the payment of annual premiums for a specified period of time.

Annual Report. The insurer’s published statement to its stockholders (or policyholders in the case of a mutual insurance company), reviewing pertinent financial information about the year’s activities.

Annual Return/Report (Form 5500). A required annual report reflecting the pension plan’s operation for the year; to be submitted to the IRS and the DOL.

Annual Statement. A report to the state insurance department of the year’s financial results. Reports insurer’s income and expenses as well as its assets and liabilities.

Annuitant. The person who is covered by an annuity and who triggers payments of a policy. The owner of the contract may or may not be the annuitant, but the annuitant is usually the intended recipient of the annuity payments.

Annuity. (1) An amount of money payable yearly, or by extension, at other regular intervals. (2) An agreement by an insurer to make periodic payments that continue during the lifetime of the annuitant(s) or for a specified period. Protects against the risk of living too long. (Sometimes referred to as upside down life insurance. There are two principal types of annuities: fixed and variable.

Annuity Certain. An annuity that pays income for a fixed number of years regardless of whether the insured lives or dies. If it pays for life after the certain period, it is called an “annuity certain and for life thereafter.”

Annuity Due. An annuity that pays benefits at the beginning of the benefit period rather than at the end.

Annuity Option. A method of liquidating and distributing an annuity’s principal and interest so that it lasts for the lifetime of the annuitant.

Annuity Payment. See Endowment.

Annuity Period. The period of time, usually at retirement, when the annuitant begins to receive annuity payments or benefits.

Annuity with Period Certain. An annuity that pays throughout the life of the insured, but also guarantees to pay income for a specific number of years regardless of whether the insured lives or dies. If the insured is living at the end of the time specified in the policy, benefits continue beyond the guaranteed period until the death of the insured.

Answer. A statement made by the defendant and filed with a court to respond to a complaint or action brought against the defendant. It states why the defendant should not be held liable.

Anti-Coercion Law. A provision usually contained in a section of the state code entitled “Unfair Trade Practices” or a similar name, declaring the use of coercion an unfair practice and, hence, a violation of the state law.

Anti-Selection. See Adverse Selection.

Apartment Flat. A multi-story building subdivided into one-story units, with each unit usually having one owner. Residents share a common entrance. Commonly bought as a condominium or cooperative.

App. A trade expression for the insurance application. See Application.

Apparent Agency. See Presumption of Agency.

Apparent Authority. Authority of an agent that is created when the agent oversteps actual authority, and when inaction by the insurer does nothing to counter the public impression that such authority exists.

Appeal. The right of a party who has received an adverse decision to take the case to a higher court for review.

Appellant. The person appealing to the higher court.

Appellate. Refers to courts that hear appeals for review of decisions rendered by a lower court.

Appellee. The respondent, or the person against whom the appellant is making an appeal.

Application. A form on which the prospective insured states facts requested by the insurer on the basis of which, together with information from other sources, the insurer decides whether to accept the risk, modify the coverage offered or decline the risk. See App.

Appointment. See Agent’s Appointment.

Apportionment. The method of dividing a loss among insurers in the same proportions as their participation when two or more companies cover the same loss.

Appraisal. An evaluation of property made to ascertain either the appropriate amount of insurance to write or the amount of loss to pay. If the parties involved disagree on the value of the property or the amount of loss, either may ask for an appraisal of the loss. In this event, each party selects a competent and impartial appraiser. The two appraisers select an umpire. If they cannot agree, selection may be made by a judge of a court having jurisdiction. The appraisers state separately the value of the property and amount of loss. If they fail to agree, they submit their differences to the umpire. A decision agreed to by any two is binding.

Approved. The condition which exists when the person or object to be insured meets the underwriting standards of the insurer.

Approved Charge. Amounts paid under Medicare as the maximum fee for a covered service.

Approved Health Care Facility or Program. A facility or program that is approved by a health care plan as described in the contract.

Approved Pension Plan. A pension plan qualifying for tax exemptions under provisions of the Internal Revenue Code.

Approved Roof. A term used in building construction that indicates a roof made of fire-resistive materials, such as tile or asphalt shingles.

Appurtenant Structures. Buildings on the same premises as the main building insured under a property insurance policy. Most dwelling policies cover appurtenant structures under most circumstances.

Arbitration. Negotiation by impartial persons when the insured and the insurance company cannot agree on settling a claim. Disagreement might concern whether an insured is legally entitled to recover damages or might concern the amount of recovery. Both parties must agree to arbitration. If so agreed, each party selects an arbitrator. The two arbitrators select a third. Each party pays the cost of its own arbitrator and splits the cost of the third arbitrator. If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction.

Arbitration Clause/Provision. The provision in a property insurance contract which states that if the insurer and insured cannot agree on an appropriate claim settlement, each will appoint an appraiser, and these will select a neutral umpire. A decision by any two of the three prescribes a settlement and binds both parties to it.

ARC. See AIDS Related Complex.

ARIA. See American Risk and Insurance Association.

ARM. See Associate in Risk Management.

Arson. The willful and deliberate burning of property.

ASO. See Administrative Services Only.

Assailing Thieves. Those other than the crew using force or violence to steal a ship or its cargo. Such action is an insured peril under an Ocean Marine contract.

Assessed Value. The value of real estate or personal property as determined by a governmental unit, such as a city, for the purpose of determining taxes.

Assessment Company, Society or Insurer. An insurer who retains the right to assess policyholders additional amounts if premiums are insufficient for operations. In some cases, an assessment insurer may not charge a stipulated premium at all but will

merely assess participants in the plan a pro rata share of each claim filed plus expenses.

Asset Share Value. The value of a book of business to an insurer, assuming that the business has been in force long enough to show true mortality rates. This value must be known by the insurer in order to make rates and to sell the business. If assets share values do not grow properly, either the rates have been too low or expenses too high.

Assets. The items on the balance sheet of the insurer which show the book value of property owned. Under state regulations, not all property or other resources can be admitted in the statement of the insurer. See also Nonadmitted Assets.

Assigned Risk. A risk that is not ordinarily acceptable to insurers and that is, therefore, assigned to insurers participating in an assigned risk pool or plan. Each participating company agrees to accept its share of these risks. Assigned-risk programs are most often associated with auto insurance, and apply to any state-run program that helps high-risk property owners find insurance. See Fair Access to Insurance Requirements.

Assigned Risk Plan. A cooperative enterprise that all insurance companies doing business in the state must join. The plan constructs a policy (again, usually expensive and limited) for people whose driving records or location disqualify them from standard coverage. It then forces the participating insurance companies to take a number of assigned risk policies.

Assignee. A person to whom policy rights are assigned in whole or in part by the original policyowner.

Assignment. (1) An authorization to pay Medicare benefits directly to the provider. Medicare payments may be assigned to participating providers only. (2) The transfer of the ownership rights of a life insurance policy from one person to another. Also refers to the document that effects the transfer. (3) Transfer by the policyowner of legal rights or interest in the policy contract to a third party. Most policies cannot be assigned without the permission of the insurer.

Assignment of Benefits. A method where the person receiving the medical benefits assigns the payment of those benefits to a physician or hospital.

Associate in Risk Management. A professional designation granted by the American Institute for Property and Casualty Underwriters to those who have completed a series of examinations.

Association. See Pool and Syndicate.

Association Group Coverage. Technically, group insurance issued to an association rather than to an employer or a union. If the association offers a guaranteed-issue plan, then there is no medical underwriting, as all members are guaranteed a policy. However, most association plans require some medical underwriting, or what is sometimes referred to as simplified or progressive underwriting.

Association of Life Insurance Counsel. An organization of life company attorneys that seeks to increase knowledge in areas of the law affecting life insurance.

Assume. To accept from another insurer all or part of the risk of an insured loss.

Assumed Interest Rate (AIR). An assumed value assigned to the annuitant’s account during the annuity period. It is an estimated return for the separate account. Monthly annuity payments are based on the AIR in relation to the actual rate of return experienced by the separate account of a variable annuity.

Assumed Liability. See Contractual Liability.

Assumption Certificate. A statement of coverage by the reinsurer that guarantees payment to a party not in privity with the reinsurance contract. Same as cut-through clause.

Assumption. An amount accepted by the reinsurer.

Assumption of Risk. One of the common law defenses available to an individual. For instance, one person riding with another in a vehicle has generally “assumed the risk” and, therefore, has no action against the driver of the vehicle should an accident occur. This common law concept has been modified by recent case law and by statute in some jurisdictions.

Assurance. Same as Insurance.

Assured. Same as Insured.

Assurer. Same as Insurer.

Atomic Energy Reinsurance. See Mutual Atomic Energy Reinsurance Pool.

Attached Structures. The standard homeowners policy covers not only the house but also structures attached to it—such as an attached garage, breezeway, patio, etc. This coverage also extends to building materials and supplies used to expand the house, build a facility like a pool or make repairs to the existing structure. This material is covered in the event of a fire, etc.

Attachment. A court order allowing one person to take something of value belonging to another into custody for a particular purpose. For example: An insured accidentally drives his car into the wall of someone else’s garage. The garage owner has the right to attach the insured’s car (take it into custody) as a way of guaranteeing that the insured will pay for repairing the damage. An attachment ensures that something of value is available to settle the claim if the individual is held liable.

Attained Age. The age an insured has reached on a given date.

Attending Physician’s Statement (APS). A source of medical information used when underwriting a life or health insurance policy; usually obtained from the proposed insured’s doctor. This report provides detailed information about an insured’s medical history or current physical condition.

Attested Will. A formal will that is produced (handwritten, typed, etc.), signed by the testator and witnessed.

Attorney-in-Fact. The individual who manages a reciprocal insurance exchange and to whom each subscriber gives authority to exchange insurance on the subscriber’s behalf with other subscribers. See also Reciprocal Insurance Exchange.

Attractive Nuisance. The law states that an individual owes no duty of care to a trespasser upon that individual’s property. However, the law states that a special duty of care is required of a person with respect to conditions that attract children. Attractive nuisances includes swimming pools, jungle gyms, etc.

Audit. A survey of the insured’s payroll records to determine the premium that should be paid for the coverage furnished. Used in workers’ compensation and general liability policies.

Audit Bureau. A central office or bureau to which agents and companies send certain daily reports and endorsements for auditing before transmittal to the insurer.

Authorization. The amount of insurance an underwriter agrees to accept on a risk of a given class on specific property. It is given for the guidance and information of agents.

Authorized Insurer. An insurer authorized by the state to transact business in that state for specific types of insurance.

Automatic Cover. Coverage given automatically by a policy, usually for a specified period and limited amount, to cover increasing values and newly acquired and changing interests.

Automatic Increase in Insurance Endorsement. See Inflation Guard Coverage.

Automatic Premium Loan. A provision in a life policy authorizing the insurer to use the loan value to pay any premiums still due at the end of the grace period.

Automatic Reinstatement Clause. A stipulation in a property insurance policy which states that after a partial loss covered by the policy has been paid, the original limit of the policy will be automatically reinstated. Same as Loss Clause.

Automatic Reinsurance. (1) This form of reinsurance, also known as treaty reinsurance, is one whereby an insurer must cede that portion of a risk that is above the limit established by contract, and the reinsurer must accept all risks ceded to it. (2) Reinsurance of specified types of risks which is automatically ceded and accepted within the terms of the contract, called a treaty, without consideration of each one individually. The reinsurance takes effect as soon as the original contract is in force. Same as Obligatory Reinsurance. Contrast with Facultative Reinsurance.

Automobile Fleet. Refers to a number of automobiles under the same ownership. For insurance purposes a fleet usually consists of five or more self-propelled units and generally qualifies for certain premium reductions and rating plans.

Automobile Insurance Plans. A name used to identify assigned risk plans. See Assigned Risk.

Automobile Insurance. Insurance that protects the insured against losses involving automobiles. Different coverages can be purchased depending on the needs and wants of the insured (e.g., the liability coverages of bodily injury liability, property damage liability and medical payments, and the physical damage coverages of collision and comprehensive).

Automobile Use Classifications. An insured’s needs and the insurance company’s risk analysis coincide in the question of how an insured uses his vehicles. The insurance company’s primary rating factors include use classifications. These include “pleasure use,” “business use,” “farm use” and “driving to work.” If a car is used only for pleasure (this is sometimes called occasional use), premiums are lower than if the car is driven every day to work. Cars claimed for business use tend to be more expensive to insure.

Average Adjuster. One whose primary work is the adjusting of ocean marine losses.

Average Benefit Test. A coverage or discrimination test for a qualified plan that states that at least 50 percent of the lower paid employees must benefit from the plan and the average benefit provided must be at least 70 percent of the benefit provided for the higher-paid employees.

Average Clause. A clause providing that similar items in one location or several locations that are insured by a policy shall be covered in the proportion that the value of each bears to the value of all. Also known as the average distribution clause. See also Pro Rata Distribution Clause.

Average Cost Per Claim. The total cost of administrative and/or medical services divided by the number of units of exposure such as costs divided by number of admissions or by number of outpatient claims, etc.

Average Earnings Clause. See Relation of Earning to Insurance Provision.

Average Indexed Monthly Earnings (AIME). A wage indexing formula based on earnings listed in the records of the Social Security Administration; used to compute Social Security benefits for retirement, survivors benefits and disability income benefits.

Average Length of Stay (ALOS). The total number of patient days divided by the number of admissions and discharges during a specified period of time. This gives the average number of days in the hospital for each person admitted.

Average Rate. A rate for a policy established by multiplying the rate for each location by the value at that location and dividing the sum of the results by the total value.

Average Weekly Wage. A term generally used in workers’ compensation laws that is the basis for determining weekly benefits under such laws.

Aviation Accident Insurance. Insurance that protects individuals as passengers or pilots, usually on scheduled aircraft, or that covers the flight travel of the employees of a company under a master policy.

Aviation Hazard. The extra hazard of death or injury resulting from participation in aeronautics, usually as other than a fare-paying passenger in licensed aircraft. This generally requires an extra premium rating or waiver of certain benefits or coverage.

Aviation Insurance. Insurance that protects an insured against losses connected with the use of an airplane. Coverage depends upon the needs and desires of the insured and can include the liability coverages of bodily injury, property damage, passenger bodily injury and medical payments, as well as physical damage or hull coverage. Hull coverage can be written to provide either broad or limited coverage. Coverage can also be written for airports, aircraft dealers, airlines and hangarkeepers’ liability.

Avocation Questionnaire. A form that an insured must fill out if he or she is engaged in a hazardous hobby. Provides more specific information concerning the hobby.

Avoidance of Risk. Taking steps to remove a hazard, engage in an alternative activity or otherwise end a specific exposure. One of the four major risk management techniques. See Risk Management.

B

Backdating. A procedure for making the effective date of a policy earlier than the application date. Often used to make the age at issue lower than it actually was in order to get a lower premium. State laws often limit (to six months) the time to which policies can be backdated.

Bad Faith. Lawsuits or regulatory complaints relating to delays or denials usually allege bad faith on the part of the insurer. This is one of the heaviest clubs a policyholder can wield to strike back at an insurance company. One way an insurance company can act in bad faith is by investigating a claim with an eye toward not providing coverage.

Bail Bond. A bond that guarantees that a person released from legal confinement will appear as required in court, or the penalty of the bond will be forfeited to the court. In insurance policies, bail bond fees are covered under an auto policy.

Bailee. A person or concern having possession of personal property entrusted to that person by the owner (e.g., a laundry that has custody of customers’ clothing for washing or dry cleaning). Bailees must exercise the same care with the property of others as they would with their own property.

Bailees Customer Insurance. Insurance purchased by a bailee to protect the personal property of customers against loss caused by specific perils (e.g., a carpet cleaner who buys coverage to protect customers against loss or damage to their carpets while in the store’s care.

Bailees Liability Coverage. Coverage that meets the needs of a bailee’s liability. The bailee’s legal responsibility is to exercise care appropriate to the circumstances of the bailment. (Most bailees want to carry enough insurance to make good any loss to property in their custody whether or not they are legally liable.)

Bailment. The personal property of one person being held by another with the intent of its being returned to the original owner (e.g., cars in a garage for repairs).

Bailor. A person who owns property that is entrusted to another (e.g., the owner of a fur coat who has entrusted it to a furrier for storage).

Balance Sheet. A listing of the assets, liabilities and surplus of a company or individual as of a specific date.

Bank Loan Plan. See Financed Insurance.

Bankers Blanket Bond. Insurance purchased by banks to pay for losses due to the dishonesty of employees as well as losses caused by people other than employees due to burglary, robbery, larceny, theft, forgery and mysterious disappearance.

Barratry. A fraudulent breach of duty on the part of a master of a ship causing loss to the owner of the ship or the owner of the cargo.

Base Capitation. The total amount which covers the cost of health care per person, minus any mental health or substance abuse services, pharmacy and administrative charges.

Base Premium. See Subject Premium.

Base Rate. The cost of a given unit of insurance for each specific type of auto coverage, such as bodily injury and property damage liability. For example, a base rate might be $300 for $100,000 of liability coverage. A driver with a poor driving record must be charged an increased amount to reflect the poor record. This increased amount is computed by multiplying the base rate by a rating factor. See also Rating Process.

Basic Auto Policy. Once used to insure commercial vehicles, motorcycles, motorscooters and a variety of substandard risks. This policy had broad eligibility rules, but the scope of coverage was narrower than modern auto policies. Most automobile risks today are insured by business or personal auto policies, with appropriate endorsements.

Basic Coverage Form. A commercial or personal lines property form that provides basic coverages. These forms generally provide the most limited coverage, which is surpassed by broad forms and special forms.

Basic Extended Reporting Period. An automatic “tail” for reporting claims after expiration of a “claims-made” liability policy. It is provided without charge and consists of two parts: a mini-tail covers claims made within 60 days after the end of the policy; a midi-tail covers claims made within five years after the end of the policy period arising out of occurrences reported not later than 60 days after the end of the policy. See also Tail.

Basic Form Rates. Under the latest commercial lines program, Basic Form Rates are arrived at by adding Group I and Group II rates together. See Group I Rates and Group II Rates.

Basic Hospital Expense Insurance. Hospital coverage providing benefits for room and board and miscellaneous hospital expenses for a specified number of days during hospital confinement.

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

Basic Limits of Liability. Minimum amounts of insurance. This usually refers to bodily injury and property damage limits that are either the lowest amounts which can be written at the published or manual rates, the minimum amount of insurance an insurer is willing to underwrite or the minimum amount of insurance required by law (e.g., auto insurance financial responsibility laws).

Basic Medical Expense Insurance. Basic medical coverage for doctor visits, diagnostic x-rays, lab tests and emergency treatments. Usually written without deductibles and coinsurance provisions, but benefits are limited to specified dollar amounts. Contrast with Major Medical Insurance.

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

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

Bed Days/1,000. The number of inpatient hospital days per 1,000 members of a health plan.

Below Market Loan. A demand loan with interest paid below the federal rate; typically, part of an executive loan program provided by an employer.

Bench Error. A loss that occurs in the production process (e.g., if production workers mistakenly use the wrong ingredients in a chemical formula). Bench errors are covered by products insurance.

Beneficiary. A person who may become eligible to receive or is receiving benefits under an insurance policy other than a participant. There may be one or more designated beneficiaries, including primary beneficiaries who are entitled to the proceeds if they are living, and contingent beneficiaries who are entitled to the proceeds if there is no surviving primary beneficiary when an insured dies. See also Irrevocable Beneficiary, Revocable Beneficiary, Primary Beneficiary, Secondary Beneficiary and Contingent Beneficiary.

Benefit. The amount paid to a participant of a retirement plan or to the participant’s beneficiary at retirement, death or termination of service.

Benefit, Flat Dollar. A monthly benefit given to all employees regardless of length of service or standard of living. (Everyone receives the same amount.)

Benefit, Flat Percentage. A monthly pension benefit determined by a fixed percentage of compensation. Although recognizing the employee’s standard of living, it still ignores length of service.

Benefit Levels. The maximum amount a person is entitled to receive for a particular service or services under a contract with a health plan or insurer.

Benefits of Survivorship. See Survivorship Benefits.

Benefit Package. A description of the services an insurer or health plan offers to those covered under the terms of a health insurance contract.

Benefit Period (BP). The period during which a Medicare beneficiary is eligible for Part A benefits. A benefit period is 90 days and begins the day the patient is admitted to a hospital and ends when the individual has not been hospitalized for a period of 60 consecutive days.

Benefits. The financial reimbursement and other services provided to insureds by insurers under the terms of an insurance contract (e.g., the benefits listed under a life or health policy or benefits as prescribed by a workers’ compensation law).

Benefit Stacking. Adding the uninsured motorists limits from insurance on several different cars

to apply to a single claim.

Betterment. See Improvements and Betterments Insurance.

BI. (1) Bodily Injury Liability. (2) Business Interruption Insurance and Business Income Coverage Form. This is what these letters most often refer to in the property field.

Bid Bond. A bond filed with a bid for a construction or other project that guarantees that if the contractor has the low bid and is awarded the job, the required performance bond will be furnished.

Billed Claims. The amounts submitted by a health care provider for services provided to a covered individual.

Binder. An agreement executed by an agent or insurer (usually the latter) putting insurance into force before the contract is written or premium is paid. Not used in life insurance. See Cover Note.

Binding Receipt. See Conditional Binding Receipt.

Birth Rate. The number of births related to the total population in a given group during a period of time. (Usually expressed as births per 100,000 people in one year.)

Birthday Rule. A method of determining which parent’s medical coverage is primary for dependent children: the parent whose birthday falls earliest in the year usually has the primary plan.

Blackout Period. The period of time during which a surviving spouse no longer receives survivors benefits (after the youngest child is no longer eligible) and before he or she is eligible for retirement benefits.

Blanket Bond. A fidelity bond that covers losses caused by the dishonesty of all employees as opposed to a bond that specifically identifies only certain employees to be covered. See also Blanket Position Bond and Commercial Blanket Bond, and contrast with Name Position Bond and Name Schedule Bond.

Blanket Contract. See Blanket Insurance.

Blanket Crime Policy. A policy that once provided a package of coverages for employee dishonesty, loss of money and securities inside and outside the premises, depositor’s forgery, loss of money orders and loss due to counterfeit paper currency. It has been replaced by modern commercial crime coverage.

Blanket Fidelity Bond. See Blanket Bond.

Blanket Honesty Bond. See Commercial Blanket Bond.

Blanket Insurance. (1) Health insurance that covers all of a class of persons not individually identified in the contract. (2) Property insurance that covers, in a single contract, either multiple types of property at a single location or one or more types of property at multiple locations.

Blanket Medical Expense. A policy or provision in a health insurance contract that pays all medical costs, including hospitalization, drugs and treatments, without limitation on any item except possibly for a maximum aggregate benefit under the policy. It is often written with an initial deductible amount.

Blanket Position Bond. A Blanket Fidelity Bond where the amount of coverage applies separately to each position covered. Contrast with Commercial Blanket Bond (offers a single amount of coverage for any one loss, regardless of the number of employees involved). See also Blanket Bond.

Blasting and Explosion Exclusion. Exclusion of liability for damages from blasting or explosions. An additional rate is charged.

Block Policy. An open perils (all risk) policy that derives its name from the French term en bloc meaning “all together.” It provides coverage on stock, property being transported or in bailment and on the premises of others.

Blowout and Cratering. Accidents that can arise from drilling operations. Generally includes damage to property above the surface of the earth arising out of blowout or cratering of any well. Usually added by endorsement for an additional premium.

Blue Cross. Blue Cross plans are hospital expense prepayment plans designed primarily to provide benefits for hospitalization coverage, with certain restrictions on the type of accommodations.

Blue Plan. A generic designation for those companies, usually writing a service rather than a reimbursement contract, who are authorized to use the designation Blue Cross or Blue Shield and the insignia of either.

Blue Shield. Blue Shield plans are prepayment plans offered by service organizations covering medical and surgical expenses.

Board Certified. A physician or other professional certified as a specialist in a particular medical area.

Board Eligible. A professional or physician who is eligible to become certified as a specialist.

Bobtailing. Using the truck/tractor after unloading the trailer and not driving for trucking purposes.

Bodily Injury. Coverage for bodily harm, sickness or disease. Includes the costs of required care, loss of services or death resulting from an injury.

Bodily Injury Liability (BI). A legal liability that may arise as a result of the injury or death of another person. This coverage pays the other person’s medical and rehabilitation expenses and any damages for which they may sue.

Boiler and Machinery Coverage. Insurance against the sudden and accidental breakdown of boilers, machinery, and electrical equipment. Coverage is provided on: 1) damage to the equipment; 2) expediting expenses; 3) property damage to the property of others; 4) supplementary payments; and 5) additional objects. Coverage can be extended to cover consequential losses and loss from business interruption.

Bond. A three-party contract guaranteeing that if one person, the principal, fails to perform as specified or proves to be dishonest, the person to whom the duty is owed, the obligee, will be financially protected by the issuer of the bond, the surety.

Bond, Contract. See Contract Bond.

Bond, Court. See Court Bond.

Bond, Fidelity. See Fidelity Bond.

Bond, Fiduciary. See Fiduciary Bond.

Bond, Forgery. See Forgery Bond.

Bond, Maintenance. See Maintenance Bond.

Bond, Performance. See Contract Bond.

Bond, Permit. See Permit Bond.

Bond, Public Official. See Public Official Bond.

Bond, Surety. See Suretyship.

Book of Business. A total of all insurance accounts written by a company or agent, including: an insurer’s book of automobile business; an agent’s overall book of business; an agent’s book of business with each insurer; etc.

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

Bordereau. (1) A written report of individual cessions, usually detailed to show such items as reinsurance premiums or reinsurance losses with respect to specific risks. (2) A memorandum containing information concerning documents that accompany it. Used extensively in passing reinsurance from one insurer to another under a reinsurance agreement and by property and liability general agents for passing information to various insurers on coverages written.

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

Boston Plan. A plan where insurers agree that they will not reject property coverage on residential buildings in a slum area. Insurers agree to accept the coverage until there has been an inspection and the owner has had an opportunity to correct any faults. Boston was the first city to originate such a plan. Other cities have followed, including New York, Oakland, Cleveland and Buffalo.

Bottomry. A contract of insurance by which a ship or its cargo is pledged as collateral for a loan required to support a maritime venture. If the ship or cargo is lost, the loan is canceled and the borrower would not have to repay the loan.

Boycott. A trade practice that occurs when someone refuses to have business dealings with another until he or she complies with certain conditions or concessions.

Branch Manager. An executive who manages a branch office for an insurer or an agency. See also Regional Office.

Branch Office. See Regional Office.

Breach of the Duty to Act. When a tortfeasor does not act in a reasonably prudent manner toward another. See Negligence.

Brick Construction. A building with at least 75 percent of the exterior walls made of some type of masonry construction (e.g., brick, stone or hollow masonry tile, poured concrete or reinforced concrete, or hollow masonry block).

Brick Veneer Construction. A building with outside walls constructed of wood and a facing of a single layer of brick.

Brief. A statement—prepared by an attorney to be filed with a court—that highlights the principal issues of a case.

Broad Form. Policies that provide insurance for multiple types of perils over and above the usual basic perils, or additional coverages beyond standard coverages.

Broad Form Nuclear Energy Liability Exclusion Endorsement. A form attached to every general liability coverage part that excludes coverage for any loss resulting from the hazardous properties of nuclear material related to the operations of a nuclear facility.

Broad Form Personal Theft Policy. Theft coverage on personal property at private residences, usually on an open perils (all risk) basis. A limited form of the Broad Form Personal Theft policy is known as the Personal Theft policy.

Broad Form Property Damage Endorsement. An endorsement to a general liability policy that deletes the exclusion referring to property in the care, custody or control of the insured and replaces it with a less restrictive exclusion.

Broad Form Storekeepers Insurance. Coverage for small storekeepers that includes several specific crime perils on the same basis as a storekeepers burglary and robbery policy, plus open perils (all risk) protection on money and securities, depositors’ forgery and a small limit on employee dishonesty. See Storekeepers Burglary and Robbery Insurance.

Broad Theft Coverage Endorsement. A form attached to a dwelling policy that provides theft coverage for a named insured who is an owner occupant. Provides coverage for loss by theft, including attempted theft, and vandalism and malicious mischief as a result of theft or attempted theft.

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

Brokerage. (1) The fee or commission received by a broker. (2) Insurance placed by brokers contrasted with that placed by agents.

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

Brokerage Business. Business offered to an insurer by a broker. Also called excess or surplus business.

Brokerage Department. A department of an insurer whose purpose is to deal with brokers in the placing of insurance.

Broker-Agent. One acting as an agent of one or more insurers and as a broker in dealing with one or more other insurers.

Builder’s Risk Coverage Form. A commercial property coverage form specifically designed for buildings in the course of construction.

Building Additions and Alterations. Coverage for improvements to a rental property (apartment or house) that have not been reimbursed by the landlord. Falls under renters insurance. Also called leasehold improvement insurance.

Building and Personal Property Coverage Form. A commercial property coverage form designed to insure most types of commercial property (buildings, contents or both). It is the most frequently used commercial property form, and has replaced the General Property form, Special Building form, Special Personal Property form and others.

Building Code. Municipal or other governmental ordinances regulating the type of construction of buildings within its jurisdiction.

Building Code Upgrade Coverage. Also known as ordinance or law coverage, provides up to $10,000 of coverage for the additional costs required to bring a damaged dwelling up to current building code requirements. Without this coverage, a policy would pay only the amount needed to repair or replace the damaged dwelling to restore it to the condition it was in prior to the loss, and would not cover any additional costs due to changes required by current building codes.

Bullion. Refers to precious metals, such as gold, in the form of ingots or bars.

Bumbershoot Policy. A liability policy (similar to the umbrella policy) that includes coverage related to ocean marine risks. Includes general liability coverage, protection and indemnity, as well as liability coverage under the Longshoremen’s and Harbor Workers’ Act. Collision coverage can be provided and general average and salvage charges can be included. Provides coverage for shipyards.

Bureau, Rating. See Rating Bureau.

Burglary. Breaking and entering into the premises of another with felonious intent. Visible marks or damage at the point of entry or exit are needed to confirm the burglary.

Burglary Insurance. Insurance against loss caused by burglars. In personal lines, burglary insurance is provided by homeowners policies and theft endorsements that are added to dwelling policies. In commercial lines, a variety of commercial crime coverage forms include burglary insurance.

Burning Cost Ratio. See Pure Loss Cost Ratio.

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

Business. (1) Any trade, profession or occupation. (2) In property, liability and health lines, it usually refers to the volume of premiums. (3) The face amount of life insurance written.

Business Activities. Any agreement, contract, transaction or other interaction that advances a person’s occupation. See Business Liability.

Business Auto Coverage Form. The latest commercial automobile insurance coverage form, which may be written as a monoline policy or as part of a commercial package. This form has largely replaced the business auto policy.

Business Auto Policy. A policy that provides liability and physical damage coverages on commercial vehicles. In most jurisdictions, this has been replaced by the business auto coverage form.

Business Income Coverage Form. A commercial property form providing coverage for “indirect losses” resulting from property damage, such as loss of business income and extra expenses incurred. (Replaced earlier business interruption and extra expense forms.)

Business Insurance. (1) Insurance for businesses or commercial establishments. (2) Life and health policies written for business purposes, such as key employee, sole proprietorship, partnership and corporation.

Business Interruption Insurance. A time element coverage that pays for loss of earnings when operations are curtailed or suspended because of property loss due to an insured peril. Now referred to as business income insurance. See Business Income Coverage Form.

Business Interruption Insurance, Contingent. Coverage for business income from dependent properties. See Business Income Coverage Form and Dependent Properties.

Business Liability. Liability coverages provided by the businessowners liability coverage form. It includes liability for bodily injury, property damage, personal injury, advertising injury and fire damage.

Business Overhead Expense (BOE) Policy. A disability income policy which indemnifies the business (not the businessowner) for certain overhead expenses incurred when the businessowner is totally disabled. Often has an elimination period of 30 to 90 days and a benefit period of one or two years.

Business Personal Property. Traditionally known as contents, this includes furniture, fixtures, equipment, machinery, merchandise, materials and any other personal property owned by the insured and used in the insured’s business.

Business Risk Exclusion. Also known as the (product) failure to perform exclusion. In products insurance, no coverage is provided for a product that does not meet the level of performance, quality, fitness or durability warranted or represented by the insured. Coverage is provided, however, if liability results from a bench error or an active malfunction.

Businessowner Policies (BOP). A package policy that provides broad property and liability coverage in a single contract and is designed for small and medium-sized mercantile, office or apartment risks.

“Buy-Back” Deductible. A deductible that may be eliminated for an additional premium in order to provide “first-dollar” coverage—coverage that doesn’t have a deductible.

Buyers Guide. A consumer publication that describes the type of coverage offered, and provides general information to help an applicant for life or health insurance compare different policies to reach a decision about whether the proposed coverage is appropriate. Also called a shoppers guide.

Buy-Sell Agreement. (1) An agreement among part-owners of a business that says that under stated conditions (i.e., disability or death), the person withdrawing from the business or the person’s heirs are legally obligated to sell their interest to the remaining part-owners, and the remaining part-owners are legally obligated to buy at a price fixed in the agreement; (2) a similar agreement between an owner or part-owner of a business and a nonowner, such as a key employee.

Bypass Trust. Also referred to as the B trust; a trust which contains estate assets that will bypass the surviving spouse and pass directly to other family members.