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Actuary: A highly specialized mathematician professionally trained in the risk aspects of insurance, whose functions include the calculations involved in determining proper insurance rates, evaluating reserves and in various aspects of insurance research.

Allied Lines: Types of insurance associated with property insurance, which may include earthquake, sprinkler leakage, and income and extra expense coverage.

Annuity: A contract that provides an income for life, a specified number of years, or a combination of the two.

Apportionment: The dividing of a loss proportionately among two or more insurers which cover the same loss.

Arbitration: Determination by impartial experts of the value of property or the extent of damage. Many insurance policies provide for appraisals where the company and the insured cannot agree on the amount or the extent of loss. Arbitration also may be used to resolve liability and policy-coverage issues in certain situations.

Arson: The willful and malicious burning of, or attempt to burn any structure or other property, often with criminal or fraudulent intent.

Assessment: The extra premium a mutual or reciprocal insurer's policyholder may be required to pay in the event the insurer's losses are greater than anticipated.

Assigned Risk Plan (Automobile Insurance Plans): A mechanism used in some states to insure people who cannot obtain insurance in the voluntary market. There is one rate level and the individual policies are assigned to specific companies according to the percentage of the market they insure.

Assurance-Insurance: These terms are today generally accepted as synonymous, although not originally so. The term "assurance" is used more commonly in Canada and Great Britain than in the United States.

Audit: An examination of the books of accounts, vouchers or other records of a person, corporation, firm or other organization for the purpose of ascertaining the accuracy or inaccuracy of the record.

Automobile Liability Insurance: Protection for the insured against loss arising out of legal liability when his or her car injures others or damages their property. (Includes Bodily Injury Liability and Property Damage Liability Coverages.) 

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Casualty Insurance: Insurance primarily concerned with the legal liability for losses caused by injury to persons or damage to property of others. Also includes, among other coverages: automobile, workers' compensation, employers' liability, general liability, plate glass, theft and personal liability. It excludes life, fire and marine insurance.

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Directors and Officers Liability Insurance: Coverage for directors and officers of firms or organizations against liability claims arising out of alleged errors in judgment, breeches of duty, and wrongful acts related to their organizational activities.

Dividends: (1) Policyholder Dividend - The return of part of the premium paid for a policy issued on a participating basis by an insurer. Any such dividend is dependent upon premiums collected in excess of losses and expenses for the particular class of business at the end of the policy period. (2) Stockholder Dividend - A portion of the surplus paid to the stockholders of a corporation.

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Employers' Liability Insurance: Provides protection for the employer for those injuries arising out of and in the course of employment which were not covered under the workers' compensation law.

Endorsement: An additional piece of paper, not a part of the original contract, which cites certain terms and which becomes a legal part of that insurance contract. Additions to life insurance contracts are accomplished through the use of riders, which are similar to endorsements.

Errors and Omissions Insurance: A type of professional liability insurance which indemnifies insured professionals - who include, but are not limited to, lawyers, insurance agents and brokers, accountants, real estate agents, appraisers, abstracters, title insurance agents, architects and engineers, advertising agents, adjusters, directors and trustees, fiduciaries, travel agents and data processing firms - for losses sustained because of their errors or oversights.

Exclusion: A provision in an insurance policy which denies coverage for certain perils, persons, property or location.

Expense Ratio: The ratio of a company's operating expenses to premiums written (Expenses include losses and loss adjustment expenses.)

Experience: The loss record of an insured or of a particular class of coverage.

Extended Coverage Property Insurance: An extension of the fire insurance policy to protect the insured against property damage caused by the additional perils of windstorm, hail, explosion, or riot, riot attending a strike, civil commotion, aircraft, vehicle and smoke.

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FAIR (Fair Access to Insurance Requirements) Plan: A facility, operating under a government-insurance industry cooperative program, to make fire insurance and other forms of property insurance readily available to persons who have difficulty obtaining such coverage.

Fee For Service (FFS): Formerly a standard health insurance policy. Now a form of health insurance that allows the insured to go to any doctor, hospital or other provider which would bill for each service given, and the insurer and the patient share in the cost of services provided.

Fidelity Bond: Protection guaranteed by the surety which reimburses an employer for losses due to dishonest acts of employees.

Fraud:Intentional concealment or misrepresentation with the objective of forcing an insurer to provide a benefit (such as paying a claim) which otherwise would not be provided.

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General Liability Insurance: A broad term meaning liability insurance, other than automobile liability of employers' liability, written to cover professional and commercial risks. As respects commercial liability, various available coverages could cover such risks as premises and operations, contractual liability, products and completed operations.

Generally Accepted Accounting Principles (GAAP): A standardized method of accounting used by businesses, especially those that are publicly traded and thus subjected to the jurisdiction of the Securities Exchange Commission. Insurers that are publicly traded will therefore use GAAP. In addition, they will use another type of accounting technique that is required by insurance regulators and which focuses on financial integrity within the insurance context. This regulatory mandated practice is called Statutory Accounting Principles.

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Homeowners Policy: A package policy for the homeowner that combines "named peril" (including theft coverage) protection on contents, coverage in the dwelling ranging from "named peril" to physical loss, additional living expense protection and personal liability insurance.

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Malpractice Insurance: Coverage afforded to a professional practitioner, such as a doctor or lawyer, against liability claims for damages resulting from alleged negligence in the performance of the insured's services.

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Personal Lines: Types of insurance written for individuals or families, rather than for businesses.

Personal Property: This type of property is usually movable and easily transportable. On the other hand, real property generally is considered to be immovable, such as land and things affixed to it. A rule of thumb definition for personal property is "everything other than real property."

Policy: The name generally used to mean the written contract of insurance.

Policyholder: One who owns an insurance policy. A mortgage often is issued a copy of an insurance policy or certificate of insurance at the request of the insured, but it is not a policyholder.

Poole: An organization of insurers or reinsurers through which particular types of risks are underwritten with premiums, losses and expenses shared in agreed ratios.

Premium: The amount of money charged a policyholder for an insurance policy.

Product Liability Insurance: Production against financial loss arising out of the legal liability incurred by a manufacturer, merchant or distributor

Property Insurance: Provides financial protection against loss or damage to the insured's property, other than automobile, caused by specified perils, such as fire, windstorm, hail, explosion, riot, aircraft, motor vehicles, vandalism, malicious mischief, riot and civil commotion, and smoke.

Proximate Cause: The dominating cause of loss or damage; an unbroken chain of events between the occurrence of an insured peril and damage to property. As an illustration, weather damage occurring from fire-fighting activities is covered under the fire policy because fire was the proximate cause of the loss.

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Rate: A charge per unit in determining insurance premiums.

Rating Bureau: An organization that gathers statistics, makes rates and/or creates policy forms and provides other services for the property and casualty insurers affiliated with the bureau.

Redlining: An illegal act to refuse to lend money or issue insurance based only on geographic area.

Reinsurance: An arrangement by which one insurer transfers all or a portion of its risk under a policy or group of policies to another insurer (reinsurer). Thus reinsurance is insurance purchased by an insurance company from another insurer, to reduce risk for the original insurer.

Reserve: (1) An amount representing actual or potential liabilities kept by an insurer to cover obligations to policyholders and third-party claimants. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion, a reserve may be an asset, such as a reserve for taxes not yet due.

Residual Market: A general term describing the total of all consumers who have had difficulty purchasing insurance through normal channels. Automobile Insurance Plans, FAIR Plans, Reinsurance Facilities and Joint Underwriting Associations all service this market.

Retention: The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.

Risk: Chance of loss with respect to person, liability or the property of the insured. Also is used to mean "the insured."

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Statutory Accounting Principle (SAP): Those principles required by state insurance laws followed by an insurance company when submitting its financial statements to the various state insurance departments. Such principles differ from Generally Accepted Accounting Practices (GAAP) in some important respects. For example, SAP requires that expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue.

Subrogation: A principle of law incorporated in insurance policies that enables an insurance company, after paying a loss to its insured, to recover the amount of the loss from another who is legally liable for it.

Surety Bond: An agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period. The surety company, for example, becomes responsible for fulfillment of a contract if the contractor defaults.

Surplus Lines: A term originating in property/casualty insurance, used to describe any risk or part thereof for which insurance is not available through a company licensed in the applicant's state (an "admitted" insurer). The business, therefore, is placed with "non-admitted" insurers (insurers not licensed in the state) in accordance with surplus or excess lines provisions of state insurance laws. These provisions generally allow operations on a relatively unregulated basis; that is, the non-admitted insurer is not subject to the same rate or coverage requirements that apply to an admitted insurer.

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Term: A period of time for which a policy is issued.

Third party: A person who files a liability insurance claim.

Threshold: Used in no-fault auto insurance to remove non-serious cases from the tort system by establishing a point of "threshold" that must be met or exceeded to sue in tort. Of those states and the District of Columbia that have no-fault auto insurance, many, including the District of Columbia, have a threshold in their plan. There are three types of thresholds: the dollar threshold, the disability threshold and the verbal threshold.

Title Insurance: An insurance contract relating to real estate described in the policy which protects the insured landowner against loss or damage by reason of defects, liens or encumbrances in the insured title, if these faults exist at the date of the policy and are not expressly excluded from its terms.

Tort: Any wrongful act, damage or injury done willfully, negligently or in circumstances involving strict liability, but not involving breach of contract, for which a civil lawsuit can be brought.

Total Disability: Disability that prevents a person from performing (a) any of his/her occupational duties, or (b) any duties for which he/she is reasonably qualified. Definitions vary within policies.

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Umbrella Liability Policy: A form of insurance protection against losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability policies. This policy is available for both personal and commercial lines coverage.

Underinsured Motorists Coverage: Coverage is intended to cover you and passengers in your car for losses unpaid because sufficient bodily injury liability limits are not available from the policy of an at-fault driver. How and under what circumstances the coverage become operative varies in different states.

Underwriter: An employee of an insurance company who is a selector of risks. The underwriter is expected to select business that will produce an average risk of loss no greater than anticipated for the class of business.

Unearned Premium: The portion of a property/casualty insurance premium that applies to the unexpired portion of the policy period.

Uninsured Motorists Coverage (UM): Pays the policyholder and passengers in his/her car for losses sustained by reason of bodily injury, sickness, disease or death caused by the owner or operator of an uninsured automobile or a "hit-and-run" driver.

Uninsured Motorists Property Damage Coverage (UMPD): Provides coverage to a vehicle involved in an accident with an uninsured motorist. UMPD is similar to "collision coverage," and is not available to those who purchase collision coverage.

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Valuation: The process of determining a company's liabilities under its policy obligations is known as policy valuation. The process of determining the value of a company's investments is known as asset valuation. Minimum valuation standards are usually prescribed by state laws.

Verbal Threshold: In no-fault auto insurance states with the verbal threshold, victims are allowed to sue in tort only if their injuries meet certain verbal descriptions of the types of injuries that should, as a matter of policy, render one eligible to seek to recover for pain and suffering in a cause of action in tort.

Voluntary Market: The market where a person seeking insurance obtains it with no help from the state, through an insurer of his or her own selection.

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Workers' Compensation: A system (established under state laws) under which employers provide insurance for benefit payments to employees for their work-related injury, death and disease regardless of fault. Not to be mistaken as health insurance.

Write: To insure, underwrite or accept an application for insurance.

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Source: Exerpts reprinted with permission from Ohio Insurance Facts, Ohio Insurance Institute. In specific circumstances, a definition may be highly technical and not entirely consistent with the generalized definition used in the glossary.

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