U&O. See Use and Occupancy Insurance.
UAB. Underwriters Adjustment Bureau.
UAC. Underwriters Adjusting Company.
UCD. See Unemployment Compensation Disability Insurance.
UJF. See Unsatisfied Judgment Fund.
UL. See Underwriters Laboratories, Inc.
Ultimate Net Loss. The total sum that the insured or any company as its insurer, or both, become legally obligated to pay either through adjudication or compromise, including among others, legal, medical and investigative costs.
Umbrella Liability Policy. A coverage affording high-limit coverage in excess of the limits of the primary policies as well as additional liability coverages. These additional coverages are usually subject to a substantial self-insured retention. The umbrella policy pays up to a predetermined limit (usually $1 million) for liability claims made against you or your family.
Umbrella Policy. A policy that provides high limits of coverage to protect against catastrophic losses, and provides broader coverage than underlying policies.
Umpire. For property coverage, if a company and a claimant fail to agree on the amount of loss, each may appoint an appraiser, and these in turn select an umpire. A decision by any two of the three is binding.
Unallocated Benefit. A benefit providing reimbursement of expenses up to a maximum but without any schedule of benefits as such.
Unallocated Claim (or Loss) Expense. Expenses of loss adjustment that cannot be charged specifically to any claim. Examples are claim department salaries and office overhead.
Unallocated Funds. Plan contributions are made or pooled for the benefit of all plan participants collectively.
Unauthorized Insurer. See Non-admitted Insurer.
Underground Property Damage. Refers to damage to underground property, such as wires, conduits or pipes, sewers, etc., beneath the surface of the ground caused by the use of mechanical equipment for the purpose of grading land, paving, excavating, drilling, burrowing, filling, backfilling or pile driving.
Underinsurance. A condition in which not enough insurance is carried to cover the insurable value.
Underinsured Motorists Coverage. A coverage in an automobile insurance policy under which the insurer pays damages up to specified limits for bodily injury damages, if the limits of liability under the liable motorist’s policy are exhausted and he cannot pay the full amount for which he is liable. See also Uninsured Motorist Coverage.
Underlying. The amount of insurance or reinsurance on a risk that attaches before the next higher excess layer of insurance or reinsurance attaches.
Underlying Insurance (also Underlying Policy). Any insurance policy that provides the initial or primary liability insurance covering one or more of the types of liability listed in the deductible section of the Declarations Page. Your auto policy and homeowners policy are underlying policies to your umbrella policy.
Underlying Policy. See Underlying Insurance.
Underlying Premium. See Subject Premium.
Underwriter. A technician trained in evaluating risks and determining rates and coverages for them.
Underwriters Laboratories, Inc. (UL). A testing laboratory for manufactured items to determine their safety.
Underwriting. The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.
Underwriting Profit (or Loss). (1) The profit or loss realized from insurance operations, as contrasted with that realized from investments. (2) The excess of premiums over losses and expenses (profit) or the excesses of losses over premiums (loss).
Unearned Income. Rents, royalties, interest, dividends, etc. paid regardless of an insured’s disability or work status. If an insured has substantial amounts of unearned income, the insurance company may reduce the benefit amount it sells.
Unearned Premium. That portion of the written premium applicable to the unexpired or unused part of the period for which the premium has been paid. Thus, in the case of an annual premium, at the end of the first month of the premium period, eleven-twelfths of the premium is unearned.
Unearned Premium Reserve. The amount shown in the insurance company’s balance sheet that represents the approximate total of the premiums that have not yet been earned as of a specific point in time. See also Unearned Premium.
Unearned Reinsurance Premium. That part of the reinsurance premium applicable to the unexpired portion of the policy reinsured.
Unemployment Compensation Disability Insurance (UCD). Health insurance that covers off-the-job accidents and sickness. It does not cover disability resulting from an injury or sickness covered by workers’ compensation insurance. See also Disability Benefits Law.
Unemployment Insurance. Insurance against loss of income due to unemployment. It is funded by payroll taxes and subject to control by both the federal and state governments. Individuals who are willing and able to work qualify for this insurance by working at a job in an eligible classification, earning a minimum amount of money and being subject to involuntary unemployment.
Unfair Claim Settlement Practices Law. State laws designed to protect the consumer against unfair practices in the reporting, investigation, payment and final resolution of insurance claims.
Unfair Trade Practices Law. State laws designed to protect the consumer against misleading, deceptive, monopolistic or otherwise unfair practices in the business of insurance.
Unfunded Plan. Any plan that follows a “pay-as-you-go” method. See Funding, Disbursement.
Unfunded Supplemental Actuarial Value. The excess of the Supplemental Actuarial Value over the Actuarial Asset Value.
Unified Tax Credit. A standard credit that can be used to offset gift and federal estate tax liabilities.
Uniform Billing Code of 1992 (UB-92). This code is a federal directive, stating how a hospital must provide its patients with bills, itemizing all services included and billed on each invoice.
Uniform Forms. Policy documents where the wording has been agreed upon by most companies and standardized. They are printed and distributed by rating bureaus and well-known establishments.
Uniform Premium. A rating system that is used to calculate premiums for all insureds with no distinctions as to age, sex or occupation.
Uniform Provisions. (1) A set of provisions required by state law in life insurance policies. (2) A set of provisions regarding the operating conditions of individual health policies developed in a model law recommended by the National Association of Insurance Commissioners.
Uniform Simultaneous Death Act. State law that states that if the insured and beneficiary die in the same accident and it cannot be determined who died first, the beneficiary is assumed to have died first, and all proceeds then pass to the insured’s contingent beneficiary.
Unilateral Contract. A contract such as an insurance policy in which only one party to the contract, the insurer, makes any enforceable promise. The insured does not make a promise but pays a premium, which constitutes the insured’s part of the consideration.
Uninsured Motorist Coverage (UM). A coverage in an automobile insurance policy under which the insurer pays damages to the insured for which another motorist is liable if that motorist has no liability insurance. This coverage usually applies to bodily injury damages only. Injuries to the insured caused by a hit-and-run driver are also covered.
Uninsured Plan. Any pension plan that is not maintained or handled through insurance products.
Unintentional Torts. The basis for these torts is usually negligence. In order for negligence to exist, the following must be present: 1) duty to act; 2) breach of the duty to act; and 3) occurrence of injury or damage.
Unit Benefit Plan. A type of pension plan providing retirement benefits as a definite amount or percentage of earnings for each year of service with the employer. If a unit of annuity is purchased each year to fund the ultimate benefit, this may also be referred to as a unit-purchase type of plan.
Unit Investment Trust (UIT). An investment company that invests on behalf of investors in a portfolio of securities such as stocks and bonds. The trust does not have a management function; it merely holds the assets.
United States Aircraft Insurance Group. A group of insurers providing coverage for all forms of aviation insurance.
United States Government Life Insurance (USGLI). Life insurance issued to members of the armed forces during World War I until the end of World War II.
Universal 24-hour Coverage. A package that provides the most complete combination of 24-hour occupational and non-occupational coverage. It includes medical and disability coverage for both accidents and diseases on a 24-hour basis. See 24-hour Coverage.
Universal Life. A combination flexible premium, adjustable life insurance policy. The premium payer may select the amount of premium he or she can pay and the policy benefits are those which the premium will purchase. Or, the premium payer may change the amount of insurance and pay premium accordingly. Many believe this is the only true solution to the “buy term invest the difference” problem.
Unlevel Commission System. A system of commissions under which the first year commission is a higher percentage of the premium than are renewal commissions.
Unoccupied. Property that may be furnished or have furnishings but is not occupied. The standard fire policy prohibits unoccupancy beyond a specified period of time. Contrast with Vacant.
Unpaid Premium Provision. A provision in a health insurance policy that allows deduction of unpaid premiums from claims payments.
Unqualified Plan. Any plan that does not meet the qualifications for special tax advantages as set forth in the Code. Such a plan provides only those deductions that are allowed in the course of normal business operation.
Unreported Claims. A reserve, based on estimates, to set up claims that have occurred but have not yet been reported to the insurer as of the time when either the policy has expired or the insurer is preparing its annual statement. See also IBNR.
Unsatisfied Judgment Fund (UJF). Several states have laws that provide for reimbursement to a per-son injured in an automobile accident who has been unable to collect from the person responsible.
Unscheduled Personal Property. Property that is not listed prior to a loss. See Scheduled Personal Property.
Unscheduled Premium Payments. In universal life insurance, the policyowner can pay extra premiums in addition to the scheduled premium payment amount. These payments can be made at any time, but are subject to a minimum amount.
Up-Front Payments. These include temporary living costs and other incidental costs paid in advance, which are voluntary to the insurance company. A company can require an insured to incur the expenses first and be reimbursed later.
Upside-Down Life Insurance. See Annuities.
Urban Property Protection and Reinsurance Act. To remedy the growing urban problem, Congress created a federal riot reinsurance program. This Act made riot reinsurance available through the National Insurance Development Fund, which is operated under the Department of Housing and Urban Development (HUD). Residents of high-crime areas who have the required security devices also may qualify for insurance with the Federal Crime Insurance Program. The policy covers only losses due to burglary or robbery.
USAIG. United States Aircraft Insurance Group.
Use and Occupancy Insurance (U&O). Also known as business interruption insurance or business income coverage. U&O may refer to loss of earnings in boiler and machinery insurance, or it may appear in contracts that promise to pay on a valued basis, or fixed amount, for each day the insured is deprived of the use or occupancy of described property because of damage caused by a peril insured against.
U.S. Longshore and Harbor Workers’ Compensation Act. This Act protects workers who load, unload, build or repair ships.
USGLI. See United States Government Life Insurance.
Usual, Customary and Reasonable (UCR). See Reasonable and Customary.
Utilization. This refers to how much a covered group uses a particular health plan or program.
Utilization and Review Committee. A committee composed of medical personnel to monitor the health care services and supplies provided to Medicare patients.
Utilization Management. This procedure or process utilizes a review coordinator to evaluate the necessity and appropriateness of various health care services.
Utilization Review. A cost-control mechanism by which the appropriateness, necessity and quality of health care is monitored by both insurers and employers.
Utmost Good Faith. Acting in fairness and equity with a sincere belief that the act is not unlawful or harmful to others. Insurance contracts require that each party is entitled to rely upon the representations of the other without attempts to conceal or deceive.
V&MM or VMM. See Vandalism and Malicious Mischief.
Vacancy. Applies to loss or damage at buildings that have been vacant for more than 60 days at the time of loss. A building is considered vacant when it does not contain enough business personal property for conducting customary business operations. Buildings under construction are not considered vacant.
Vacant. A term used in property insurance to describe a building that has neither occupants nor contents. Contrast with Unoccupied.
Vacant Land. Lots and undeveloped land for future building of a dwelling or for investment purposes. Coverage for these lands, commonly found in general homeowners policies, is an extension of personal liability insurance to these lands.
Valuable Papers and Records Coverage. An open perils (all risk) coverage for physical loss or damage to valuable papers and records of the insured. It includes practically all types of printed documents or records except money.
Valuation Assumption. An actuarial estimate of probable future experience of a pension plan with respect to rates of mortality, disability, turnover, age at hiring, age at retirement, investment yield, etc.
Valuation Clause. A clause stating the value of items for insurance purposes, making it a valued policy.
Valuation Reserve. A reserve against the contingency that the valuation of assets, particularly investments, may be higher than what can be actually realized or that a liability may turn out to be greater than the valuation placed on it.
Valuation. (1) A mathematical analysis of the financial condition of a pension plan. (2) Estimation of the value of an item, usually by appraisal. (3) Calculation of the policy reserve in life insurance.
Value Reporting Form. Commercial form designed for businesses that have fluctuating merchandise values during the year. As values are reported (monthly, quarterly or annually) the amount of insurance is adjusted.
Valued. Relating to an agreement by an insurer to pay a specified amount of money to or on behalf of the insured upon occurrence of a defined loss.
Valued Policy. A policy that states that in the event of a total loss, a specific amount will be paid. This eliminates the need for determining the actual cash value of an item of property in the event of a total loss. It is generally used with certain more valuable items, such as fine arts, antiques and furs. See also Valued Policy Law.
Valued Policy Law. A law passed by a state legislature requiring that in the event of a total loss to a building, the insurance company pays the face amount of a valued policy, regardless of the actual cash value of the property that was destroyed. It can allow the insured to recover an amount much greater than the actual cash value of the property. This guards against unscrupulous insurers purposely writing in excess of the value of property in order to collect greater premiums.
Values. Used in life insurance terminology as a shortened term for nonforfeiture values. See Nonforfeiture Values.
Vandalism and Malicious Mischief (V&MM or VMM). Willful damage or destruction to property. Today this is automatically covered by basic commercial and homeowner forms.
Variable Annuity. An annuity contract in which the amount of the periodic benefit varies, usually in relation to security market values, a cost-of-living index or some other variable factor in contrast to a fixed or guaranteed return annuity. As a hedge against inflation, the variable annuity presents investment risks to the annuitant.
Variable Contracts. Contracts such as variable annuities or variable life insurance that contain an element of risk for the investor depending on the performance of the separate account backing the contract. Generally, these contracts are products of insurers but regulated by both state insurance departments and the federal government.
Variable Expenses. These are the unexpected, nonfixed expenses that occur from month to month, such as automobile repairs, medical expenses, prescriptions, home repairs, miscellaneous expenses, etc. Some estimation of these unexpected monthly obligations must be determined—and the source from which they will be paid.
Variable Life Insurance. A form whose face value varies depending upon the value of the dollar or securities or other equity products at the time payment is due.
Variable Universal Life. A combination of the features of variable life insurance and universal life insurance under the same contract that provides death benefits and cash values that are variable based on the value of equity investments. Premiums and benefits are adjustable at the option of the policyholder.
VEBA. Voluntary Employee Beneficiary Association.
Vehicle Identification Number (VIN). A series of characters—numbers and letters—used to identify an automobile, assigned to the vehicle by the manufacturer. Only the first eight characters are critical to the rating process.
Vehicle Liability. Liability arising from property damage to other people’s cars, injury to people occupying other cars, injury to pedestrians and damage to property other than cars (such as a fence).
Vendee. A person who purchases property.
Vendor. A person who sells property.
Vested Commissions. Commissions on renewal business that are paid to the agent whether or not he or she still works for the insurance company with which the business is placed.
Vested Interest. A person has a right to either the present or future enjoyment of personal property.
Vested Liability. The present value of a participant’s retirement benefits that are nonforfeitable.
Vesting. The attainment of a benefit right by a participant, attributable to employer contributions, that is not contingent upon a participant’s continuation in specified employment. See also Contingent Vesting, Deferred Vesting and Immediate Vesting.
Viatical Settlement. A written contractual agreement under which the policyholder of a life insurance contract covering the life of a terminally ill person assigns, transfers ownership or otherwise irrevocably designates all control and rights in the contract to another person or entity (viatical settlement company) in exchange for the advance payment of a percentage (usually 60 percent to 80 percent) of the eventual death benefit. Under these arrangements, a portion of the proceeds is paid to the insured or policyholder prior to the actual death of the insured person. The settlement company then receives the death benefit when the insured person dies. These settlements are considered taxable income by the government.
Viatical Settlement Company. A company or firm that specializes in negotiating viatical settlements with policyholders of life insurance contracts covering the lives of terminally-ill persons.
Vicarious Liability. Under certain circumstances, a person is liable for the acts of someone else (e.g., a parent might be held responsible for the negligent acts of a child).
Vis Major. An accident for which no one is responsible. An act of God.
Vision Care Coverage. A health care plan usually offered only on a group basis that covers routine eye examinations and may cover all or part of the cost of eyeglasses and lenses.
Void. A term used to describe a policy contract that is completely free of all legal effect.
Voidable. A policy contract that can be made void at the option of one or more of the parties to it (e.g., a property insurance policy can be voided by the insurer if the insured commits illegal acts).
Voluntary Compensation Insurance. A coverage similar to workers’ comp used in circumstances where workers’ comp coverage does not apply or is not required by law (e.g., an employer wanting to voluntarily pay compensation benefits to members of a company-sponsored athletic team or a church wishing to cover volunteer workers).
Voluntary Employee Beneficiary Association (VEBA). A trust established under IRS Code 501(c)(9) that can be used to prefund health care.
Voluntary Market. The market where people seek insurance on their own—without state or federal help—through an insurer of their own selection. Contrast with Assigned Risk and Assigned Risk Plan.
Voluntary Reserve. An allocation of surplus not required by law. Such reserves are often accumulated by insurers in order to strengthen their financial structure.
Voyage Clause. A clause in ocean marine policies that defines a specific voyage covered.