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Financing Premiums - Financial Directory
Insurance terms you should know:
A | B | C | D | E | F | G | H | I-J-K | L | M-N-O| P-Q | R | S-T | U-V-W-W-Y-Z
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A | B | C | D | E | F | G | H | I-J-K | L | M-N-O| P-Q | R | S-T | U-V-W-W-Y-Z
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binder is
a temporary or preliminary agreement which provides coverage until a policy can be
written or delivered.
broker is
a licensed person or organization paid by you to look for insurance on your behalf.
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cancellation is
the termination of insurance coverage during the policy period. Flat cancellation is the
cancellation of a policy as of its effective date, without any premium charge.
captive agent is
representative of a single insurer or fleet of insurers who is obliged to submit
business only to that company, or at the very minimum, give that company first refusal
rights on a sale. In exchange, that insurer usually provides its captive agents with an
allowance for office expenses as well as an extensive list of employee benefits such as
pensions, life insurance, health insurance and credit unions.
casualty insurance is
casualty insurance coverage is primarily for the legal liability of an
individual or organization that results from negligent acts and omissions causing bodily
injury and/or property damage to a third party. However, the term is broad and includes
such property insurance as aviation insurance, boiler and machinery insurance, glass
insurance and crime insurance.
claim is
notice to an insurer that under the terms of a policy, a loss maybe covered.
claimant is
the first or third party. That is any person who asserts right of recovery.
contents-only coverage is
in personal property insurance, this coverage is for personal property items that are
movable, that is, not attached to the building's structure (the home), such as television
sets, radios, clothes and household goods. Not included under the coverage are animals,
automobiles and boats.
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decline is
the company refuses to accept the request for insurance coverage.
deductible is
the amount of the loss which the insured is responsible to pay before benefits from the
insurance company are payable. You may choose a higher deductible to lower your premium.
depreciation is
a decrease in value due to age, wear and tear, etc.
direct writer is
method of selling insurance directly to insureds through a company's own employees,
through the mail, the internet, or at airport booths.
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endorsement is
amendment to the policy used to add or delete coverage. Also referred to as a
"rider."
exclusion is
certain causes and conditions, listed in the policy, which are not covered.
expiration date is
the date on which the policy ends.
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face amount is
the dollar amount to be paid to the beneficiary when the insured dies. It does not
include other amounts that may be paid from insurance purchased with dividends or any
policy riders.
fair market value is
the price that a willing buyer would pay a willing seller, neither being under any
compulsion to sell or buy.
fire insurance is
coverage for loss of or damage to a building and/or contents due to fire.
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grace period is
a period (usually 31 days) after the premium due date, during which an overdue premium
may be paid without penalty. The policy remains in force throughout this period.
guaranteed insurability is
an option that permits the policy holder to buy additional stated amounts of life
insurance at stated times in the future without evidence of insurability.
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health insurance is
a policy that will pay specifies sums for medical expenses or treatments. Health
policies can offer many options and vary in their approaches to coverage.
homeowner insurance is
an elective combination of coverages for the risks of owning a home. Can include losses
due to fire, burglary, vandalism, earthquake, and other perils.
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incontestable clause is
a policy provision in which the company agrees not to contest the validity of the
contract after it has been in force for a certain period of time, usually two years.
independent agent is
contractor who represents different insurance companies and who searches the market for
the best coverage based on a client's insurance needs.
insured is
the policyholder - the person(s) protected in case of a loss or claim.
insurer is
the insurance company.
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liability insurance is
protection for your negligent acts that result in bodily injury and/or damage to
another's property.
life insurance is
a policy that will pay a specified sum to beneficiaries upon the death of the insured.
limit is
maximum amount a policy will pay either overall or under a particular coverage.
loan value is
the amount which can be borrowed at a specified rate of interest from the issuing
company by the policyholder, using the value of the policy as collateral. In the event the
policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus
any interest is deducted from the amount payable.
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material misrepresentation is
the policyholder / applicant makes a false statement of any material (important) fact on
his/her application. For instance, the policyholder provides false information regarding
the location where the vehicle is garaged.
misquote is
an incorrect estimate of the insurance premium.
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peril is
the cause of a possible loss. For example, fire, theft, or hail.
policy is
the written contract of insurance.
policy limit is
the maximum amount a policy will pay, either overall or under a particular coverage.
premium is
the amount of money an insurance company charges for insurance coverage.
premium financing is
a a policyholder contracts with a lender to pay the insurance premium on his/her behalf.
The policyholder agrees to repay the lender for the cost of the premium, plus interest and
fees.
property insurance is
property insurance indemnifies an insured whose property is stolen,
damaged, or destroyed by a covered peril. The term property insurance includes direct or
indirect property losses covered in several lines of insurance.
pro-rata cancellation is
when the policy is terminated midterm by the insurance company, the earned premium is
calculated only for the period coverage was provided. For example: an annual policy with
premium of $1,000 is cancelled after 40 days of coverage at the company's election. The
earned premium would be calculated as follows: 40/365 days x $1,000=.110 x $1,000=$110.
is
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quote is
an estimate of the cost of insurance, based on information supplied to the insurance
company by the applicant.
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rate is
cost per unit of insurance. When used to calculate a premium, it must be adequate enough
to pay expected losses according to frequency and severity, reasonable to the point that
insurers do not not earn an excessive profit and not discriminatory or inequitable. Based
on the amount of coverage needed, an individual will purchase the appropriate number of
units of insurance with the total cost reflected in a premium payment.
replacement cost is
the cost to repair or replace lost or damaged property with new materials of like kind
and quality, at current prices. Some insurance only pays the actual cash or market value
of the item at the time of the loss, not what it would cost to repair or replace it. If
you have personal property replacement cost coverage, your insurance will pay the full
cost to repair an item or buy a new one once the repairs or purchases have been made.
replacement value is
the full cost to repair or replace the damaged property with no deduction for
depreciation, subject to policy limits and contract provisions.
reinstatement is
the restoring of a lapsed policy to full force and effect. The reinstatement may be
effective after the cancellation date, creating a lapse of coverage. Some companies
require evidence of insurability and payment of past due premiums plus interest.
rider is
usually known as an endorsement, a rider is an amendment to the policy used to add or
delete coverage.
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short-rate cancellation is
when the policy is terminated prior to the expiration date at the policyholder's
request. Earned premium charged would be more than the pro-rata earned premium. Generally,
the return premium would be approximately 90 percent of the pro-rata return premium.
However, the company may also establish its own short-rate schedule.
solicitor is
a licensed employee of a fire and casualty agent or broker who may act for the agent or
broker in some circumstances.
surcharge is
an extra charge applied by the insurer. For automobile insurance, a surcharge is usually
for accidents or moving violations.
surrender is
to terminate or cancel a life insurance policy before the maturity date. In the case of
a cash value policy, the policyholder may exercise one of the nonforfeiture options at the
time of surrender.
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underwriting is
the process of selecting applicants for insurance and classifying them according to
their degrees of insurability so that the appropriate premium rates may be charged. The
process includes rejection of unacceptable risks.
waiting period is
a period of time set forth in a policy which must pass before some or all coverages
begin.