Insurance Glossary | Insurance Terms beginning with 'A'

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.

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

1. All sums due you from customers, providing you are unable to effect collection thereof as a direct result of loss or damage to records of accounts receivable.

2. Interest charges on any loan to offset impaired collections pending repayment of such sums made uncollectable by such loss or damage.

3. Collection expense in excess of normal collection cost made necessary because of such loss or damage.

4. Other expense, when reasonably incurred by you in re-establishing records of accounts receivable following loss or damage.

"Actual Cash Value" is the replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.

An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insured's policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).
Additional Name Insured

1. An individual or entity, other than the first named insured, identified as an insured in the policy declarations or an addendum to the policy declarations.

2. An individual or entity who is added to a policy with the status of named insured after the policy is written. Such an individual or entity would have the same rights and responsibilities as an individual or entity named as an insured in the policy declarations (other than those rights and responsibilities reserved to the first named insured). In this sense the term can be contrasted with additional insured, an individual or entity added to a policy as an insured but not as a named insured. The term additional named insured has not acquired a uniformly agreed-upon meaning within the insurance industry, and use of the term in the two different senses defined above often produces confusion in requests for additional insured status between contracting parties.

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.

"Advertising Injury" means injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan.

1. A limit in an insurance policy stipulating the most it will pay for all covered losses sustained during a specified period of time, usually one year. Aggregate limits are commonly included in liability policies. While not often used in property insurance, aggregates are sometimes included with respect to certain catastrophic exposures, e.g., earthquake and flood.

2. The dollar amount of reinsurance coverage during one specified period, usually 12 months, for all reinsurance losses sustained under a treaty during such period.

This endorsement is an agreement made by the insurance company wherein it waives the coinsurance clause on the specified property. As long as this endorsement is in effect, there would be no coinsurance penalty at the time of a claim.

By combining an Agreed Amount Endorsement with a Replacement Cost Endorsement (see separate explanation), you can obtain an unusually high quality of insurance coverage!

This exclusion eliminates coverage for property damage liability to premises alienated (i.e., sold) by you. For example, you own a lot and build a house on it. After the house is completed and sold, a subcontractor's faulty wiring causes the house to burn. The buyer, or his/her insurance company, sues you for the cost of repairing or rebuilding the house. There is no coverage for this exposure under standard liability policies.

Sometimes factors that enter into determining appropriate premiums for insurance coverage can't be known in advance; therefore, accurate premiums for the coverage provided can't be billed by the insurance carrier. This often is true in the case of Worker's Compensation and Product Liability insurance, where such things as payroll and sales can't be determined ahead of time. An audit serves as an examination of the insured's records after the fact to adjust the initial premium billed to reflect the actual coverage.

If you don't have Personal Automobile insurance -- perhaps because you use a company vehicle -- you have a number of possible uninsured exposures.

If you borrow someone else's car.
If you rent a car.
If you are injured while using a borrowed or rented car -- whether you're driver or passenger.
If you suffer a loss of income as a result of injury while using a borrowed or rented car -- whether you're driver or passenger.
If a member of your family (spouse, child, etc.) is involved in any of the above-mentioned situations.
If you are involved in an accident with an uninsured driver.
If you are driving a company-owned/-insured car with a "fellow employee" as passenger.
If you are subject to any of these exposures, it may be both easy and economical to obtain coverage. In many cases, the purchase of Personal Automobile insurance is not necessary, assuming you don't own or "long-term" lease a vehicle.
In addition, if you don't give adequate, repeat warning of these exposures to your employees that have company vehicles, and urge the possible need for Personal Automobile insurance, you might be held liable for their uninsured accidents! Furthermore, this "error" or "omission" would not be covered under your Commercial Automobile policy.
If any of this information applies to you, please call us to explain your particular circumstances so we can determine what needs to be done to correct this situation for you.

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

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.

Alien Insurance company

An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company that does business in states outside its own.

Allied Lines

Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage, and vandalism coverage.

Alternative Dispute Resolution

It’s 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.

Mechanisms used to fund self-insurance. 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, are also a form of self-insurance.

Annual Statement

Summary of an insurer 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.

Annuity

A life insurance company contract that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. These payments can be made annually, quarterly or monthly.
From a life insurer’s viewpoint, an annuity presents the opposite mortality risk from a life insurance policy. Life insurance pays a benefit when the policyholder dies. An annuity pays benefits as long as the annuitant lives. With both products, the insurer’s profit or loss depends on whether it made correct assumptions about the policyholder’s life expectancy and the company’s future investment returns.

Annuity investments are tax-deferred; taxes are not due until income payments begin. Annuities are often used as a form of retirement savings and some allow tax-free loans. They can be bought on a periodic schedule or through a one-time payment. There are fixed-income annuities, which invest in a general insurer’s account and offer a fixed benefit payment, and variable annuities, where individuals can choose their own investments from a menu of funds offered by the insurance company including bond and stock funds. The account value of a variable annuity reflects the performance of the investments offered by the company and selected by the annuitant whereas fixed annuity payments are guaranteed, regardless of the performance of the insurance company’s investments.

Antitrust Laws

Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.

Apportionment

The dividing of a loss proportionately among two or more insurers that cover the same loss.

Appraisal

A survey to determine a property’s insurable value, or the amount of a loss.

Arbitration

Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.

Arson

Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.

Assets

Property owned, in this case by an insurance company, including stocks, bonds, and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances, and accounts receivable that are more than 90 days past due. (See Admitted assets)

Assigned Risk Plans

Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual market)

Auto Insurance Policy

There are basically six different types of coverages. Law might require some. Others are optional. They are:

Bodily injury liability, for injuries the policyholder causes to someone else.
Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
Property damage liability, for damage the policyholder causes to someone else’s property.
Collision, for damage to the policyholder’s car from a collision.
Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.

The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.
Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information. (See Insurance score)

Aviation Insurance

Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.

Your current age. Your attained age is one of the factors life insurance companies use to determine your premiums. The older you are, the greater chance you'll die while you are covered - so the higher your premium.