ACCELERATED DEATH BENEFITS - A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured‘s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
A-SHARE VARIABLE ANNUITY - A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.
ACCIDENT AND HEALTH INSURANCE - Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.
ACCIDENTAL DEATH AND DISMEMBERMENT (AD&D) BENEFIT* - A supplementary life insurance policy benefit that provides for an amount of money in addition to the policy‘s basic death benefit. This additional amount is payable if the insured dies as the result of an accident or if the insured loses any two limbs or the sight in both eyes as the result of an accident.
ACCOUNT RECEIVABLES - See Receivables
ACTUARY - An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms‘ reserves, determines rates and rating methods, and determines other business and financial risks.
ADDITIONAL LIVING EXPENSES - Extra charges covered by homeowners policies over and above the policyholder‘s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
ADDITIONAL TERM INSURANCE OPTION* - An option available to owners of participating insurance policies under which the insurer uses a policy dividend as a net single premium to purchase one-year term insurance on the insured‘s life. Also known as fifth dividend option. (See Dividend, Policy dividend options )
ADJUSTABLE LIFE INSURANCE* - A form of life insurance that allows policy owners to vary the type of coverage provided by their policies as their insurance needs change.
ADJUSTER - An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
ADMITTED ASSETS - Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company‘s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets )
ADMITTED COMPANY - An insurance company licensed and authorized to do business in a particular state.
ADVERSE SELECTION - The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.
AFFINITY SALES - Selling insurance through groups such as professional and business associations.
AFTERMARKET PARTS - See Crash parts; Generic auto parts
AGENCY COMPANIES - Companies that market and sell products via independent agents.
AGENT - Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
ALEATORY CONTRACT* - A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event. Insurance contracts are aleatory because the policyowner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. Contrast with commutative contract.
ALIEN INSURANCE COMPANY - An insurance company incorporated under the laws of a foreign country, as opposed to a
ALLIED LINES - Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.
ALTERNATIVE DISPUTE RESOLUTION / ADR - An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
ALTERNATIVE MARKETS - Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and selfinsurance, are also included.
ANNUAL ANNUITY CONTRACT FEE - Covers the cost of administering an annuity contract.
ANNUAL STATEMENT - Summary of an insurer‘s or reinsurer‘s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.
ANNUITANT - The person who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.
ANNUITIZATION - The conversion of the account balance of a deferred annuity contract to income payments.
ANNUITY - A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant‘s lifetime. There are two basic types of annuities: deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.
ANNUITY ACCUMULATION PHASE OR PERIOD - The period during which the owner of a deferred annuity makes payments to build up assets.
ANNUITY ADMINISTRATIVE CHARGES - Covers the cost of customer services for owners of variable annuities.
ANNUITY BENEFICIARY - In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.
ANNUITY CONTRACT - An agreement similar to an insurance policy for other insurance products such as auto insurance.