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Glossary of Insurance Terms and Acronyms





Act of God: An unpreventable accident or event that is the result of natural causes; for example, floods, earthquakes, or lightning.

Adverse Selection: The tendency of individuals who believe they have a greater than average likelihood of loss to seek insurance protection to a greater extent than do those who believe they have an average or a less than average likelihood of loss.

AG: Attorney General, or Attorney General's office

Anti-selection: See Adverse Selection.

Appraisal: A survey by a claims representative or claims appraiser estimating the amount of damage to property and the cost to repair or the determination of a complete loss.

Assessed Value: The monetary worth of real or personal property as a basis for its taxation. This value, established by a governmental agency, is rarely used by insurers as a means to determine indemnification.

Asset Risk: A measure of an asset's default of principal or interest or fluctuation in market value as a result of changes in the market.

ASO: Contract: Administrative Services Only Contract

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Beneficiary: The person or party named by the owner of a life insurance policy to receive the policy benefit.

Broad Form Insurance: Coverage for numerous perils.

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Captive Insurer: A legally reconized insurnce company orgnaized and owned by a corporation or firm whose prupose is to use the captive to write its own insurance at rates lower than those of other insurers. Usually it is a nonadminted insurer that has the right, under special circumstances, to reinsure with an admitted insurer.

Cash Value: The savings element of a permanent life insurance policy, whice represents the policy owner's interest in the policy.

Catastrophic Risk: The risk of a large loss by reason fo the occurence of peril to which a very large number of insured are subject.

Catastrophic Loss: Damage resulting from a catastrophe.

COBRA: Consolidated Omnibus Budget Reconciliation Act.

Coinsurance Clause: A clause requiring the insured to maintain insurance on the property at least equal to a stipulated percentage of its value in order to collect partial losses in full.

Consumer Price Index: An index of consumer prices based on the typical market basket of goods and services consumed by all urban consumers during a base period.

Contingent Beneficiary: The party designated to receive proceeds of a life insurance policy following the insured’s death if the primary beneficiary predeceased the insured.

Convertible Term Insurance Policy: A term life insurance policy that gives the policy owner the right to convert the policy to a permanent plan of insurance.

Corrective Order: An order issued by the Commissioner specifying corrective actions that the Commissioner has determined are required.

Credit Risk: A measure of the default risk on amounts that are due from policyholders, reinsures or creditors.

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Disaster: A natural or man-made event that negatively affects life, property, livelihood or industry often resulting in permanent changes to human societies, ecosystems and the environment.

Declined Risk: A proposed insured who is considered to present a risk that is too great for an insured to cover.

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EOB: Explanation of Benefits.

ERISA: Employee Retirement Income Security Act.

EUO: Examination Under Oath.

Evidence of Insurabilty: Proof that a person is an insurable risk.

Exclusions, Homeowners Insurance: Part of an insurance contract that excludes coverage of certain perils, persons, property or locations.

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Face Amount: The amount of the death benefit payable under a life insurance policy.

FEMA: Federal Emergency Management Agency - A former independent agency that became part of the Department of Homeland Security in March 2003 - is tasked with reponding to , planning for, recovering from and mitigating against disasters.

Flood Plain: A land area adjacent to a river, stream, lake, estuary or other water body that is subject to flooding. These areas, if left undistrubed, act to stor excess floodwater.

Free Look Provision: An individual life insurance and annuity provision that gives the policy owner a stated time, usually 10 days after the policy is delivered, in which to cancel the policy and receive a full refund on the initial premium payment.

FSA: Flexible Spending Account.

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Grace Period: A specified length of time within which a renewal premium that is due may be paid without penalty.

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HDHP: High Deductible Health Plan

HIPAA: Health Insurance Portability and Accountability Acto fo 1996

HRA: Health Reimbursement Arrangements

HSA: Health Savings Account

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Insurance to Value: The amount of insurance written on property is approximately equal to its value. An insured most always wants to insure all property to value.

Incontestability Provision: An insurance and annuity provision that limits the time within which the insurer has the right to avoid the contract on the ground of material misrepresentation in the application for the policy.

IME: Independent Medical Exam

Irrevocable Beneficiary: A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured’s lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent.

Insurable Interest: The interest an insurance policy owner has in the risk that is insured. The owner of a life insurance policy has an insurable interest in the insured when the policy owner is likely to benefit if the insured continues to live and is likely to suffer some loss or detriment if the insured dies.

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Jurisdiction: The power, right or authority to interpret and apply the law; also refers to the limits within which authority can be exercised. In Insurance law, jurisdiction often refers to whether state or federal government has the ultimate authority on a particular issue.

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Liability Insurance: Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.

Loss of Use Insurance: Compensation for loss caused because the policyholder has lost the use of his property.

Loss Payable Clause: A policy condition that enables an insured to direct the company to pay any loss that may be due to a third party.

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Material Misrepresentation: A misrepresentation that would effect the insurance company's evaluation of a proposed insured.

Med-Pay: Medical Paymetns Coverage (auto insurance)

MEWA: Multiple Employer Welfare Arrangements

MHPA: Mental Health Parity Act

MS-DRG: Medicare Severity Diagnosis Related Groups

Mortality Tables: Charts taht show the death rates an insruer may reasonably anticipate amoung a particular group of insured lives at certain ages.

Mortgage Insurance: A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage.

Mortagee Clause: A clause in an insurance policy that makes a claim jointly payable to the policyholder and the party that holds a mortgae on the property.

MSA: Medical Savings Act

Multi Peril Insurance: Personal and business property insurance that combines in one policy several types of property insurance covering numerous perils.

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Named Peril Policy: The insurance contract under which covered perils are listed. Benefits for covered loss are paid to the policy-owner. If an unlisted peril strikes, no benefits are paid.

NAIC: National Association of Insurance Commissioners

National Flood Insurance Program (NFIP): The program of flood insurance coverage and flood plain management administered under the Act and applicable Federal regulations promulgated in Title 44 of the Code of Federal Regulations, Subchapter B.

NCCI: National Council on Compensation Insurance

NCOIL: National Conference of Insurance Legislators

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Original Age Conversion: A conversion of a term life insurance policy to a permanent plan of insurance at a premium rate, based on the insured's age when the original term policy was purchased.

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:  Property and Casualty

PEO:  Professional Employer Organization

Permanent Life Insurance:  Life insurance that provides coverage throughout the insured's lifetime asn also provides a savings element.

Policy Anniversary:  As a general rule, the date on which coverage under an insurance policy became effective.

Preferred Risk:  A proposed insured who presents a significatntly less than average likelihood of loss and who is charged a lower than standard premium rate.

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QDRO: Qualified Domestic Relations Order

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Renters Insurance: Coverage for the contents of renter's home or apartment and for liability. Tenant policies are similar to homeowners insurance, except that they do not cover the structure.

Retention Limit: A specified maximum amount of insurance that a life insurer is willing to carry at its own risk on any one life without transferring some of the risk to a reinsurer.

Replacement Cost: The cost of replacing property without a reduction for depreciation. by this method of determining value, damages for a claim would be the amount needed to replace the property using new materials.

Rider: An amendment to an insurance policy that becomes part of the insurnce contract and either expands or limits the benefits payable under the contract.

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SCHIP: State Childrens Health Insurance Program

Scheduled Property: Listing specific personal property for a stated insured value. This is usually considered for valuable items that are subject to limited coverage.

SERFF: System for Electronic Rate and Form Filing

SHIP: Senior Health Insurance Assistance Program

Subrogation: The circumstance where an insurance company takes the place of an insured in bringing a liability suit against a third party who caused injury to the insured.

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Tenants Insurance: See Renters Insurance

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Unbrella Policy: Umbrella coverage is insurance coverage taht extends the terms of a regular insurance policy once coverage limits for the regular policy have been reached. Specifically, umbrell coverage is for people who want protection against a large jury award that is not covered in their standard policy.

UM: Uninsured Motorist

UIM: Underinsured Motorist

Underwriting: The process of identifying and classifying the degree of risk represted by a proposed insured.

Underwriting Risk: A measure of the risk taht arises from under-estimating the liabilities from business already written or inadequately pricing current or prospective business.

USERRA: Uniformed Services Employment and Reemployment Rights Act

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VETS: Veteran's Employment and Training Services

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WHCRA: Womens Health and Cancer Rights Act

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