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Insurance Information
Immediate Annuity
An annuity that commences benefit payments immediately after a specified interval (one month or one year). This type of annuity is nearly always purchased with a single premium.
Imputed Negligence
Case in which responsibility for damage can be transferred from the negligent party to another person, such as an employer.
Incurred Claims
Incurred claims equal the claims paid during the policy year plus the claim reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. The difference between the year end and beginning of the year claim reserves is called the increase in reserves and may be added directly to the paid claims to produce the incurred claims.
Indemnification
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity
Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Independent Adjuster
Claims adjuster who offers his or her services to insurance companies and is compensated by a fee.
Independent Agent
An independent contractor who sells insurance usually on behalf of more than one insurance company under the independent agency system. Independent agents operate their own business, own the records of the policies sold through them, and are compensated by commissions or fee.
Indirect Loss
Property loss from a peril that is not the immediate cause of loss; an indirect loss (e.g. a business interruption loss, extra expense, lost rent, etc.) arising out of an insured's inability to use property damaged by another peril.
Inheritance tax
A tax based on an estate's value at the time of the owner's death. A federal unified tax is assessed on the combined value of the estate and qualifying gifts so that estate taxes cannot be avoided by gifts in anticipation of death.
Insolvent
Having insufficient financial resources (assets) to meet financial obligations (liabilities).
Inspection
In property and casualty insurance, the insurer retains the right to make inspections and surveys relating to the insurability of the risk and the premiums charged. The insurer also reserves the right for inspection of property for which a loss arises and claim presented.
Installments
When a policy is placed on a payment plan, multiple equal installments due in the future are created.
Insurability
The risk-associated qualities of a person or entity that meet an insurer's underwriting standards and therefore make the insurer willing to offer coverage at a standard premium.
Insurable Interest
The person who stands to lose financially in the event of a loss. For example, loss to an automobile, home, or contents.
Insurable Risk
A risk that meets the following criteria:
1. The insured loss must have a definite time and place;
2. The insured event must be accidental;
3. The insured must have an insurable interest in the subject of coverage;
4. The insured risks must belong to a sufficiently large group of homogeneous exposure units to make losses predictable;
5. The risk must not be subject to a catastrophic loss where a large number of exposure units can be damaged or destroyed in a single event;
6. The coverage must be provided at a reasonable cost;
7. The chance of loss must be calculable.
Insurance
A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions.
Insurance Adjuster
An insurance company employee who is responsible for settling or adjusting claims.
Insurance Commissioner
The senior official in a state's department of insurance or other insurance regulatory agency.
Insurance Company
An organization chartered to operate as an insurer.
Insurance Examiner
The insurance department representative assigned to audit the books or the market conduct of an insurance company.
Insurance Exchange
An insurance marketplace or organization patterned after Lloyd's of London, formed during the 1980s in New York City, Miami, Florida, and Chicago, Illinois. Exchanges were formed to write large or unique risks, generally on a surplus lines basis, and to write reinsurance business. Both the New York and Florida exchanges have suspended operations.
Insurance Guaranty Funds
Plans established and administered individually at the state level which assess solvent insurers in order to settle the unpaid claims of a insolvent company and to return unearned premiums to its policyholders. Insurers each pay a proportional share of the losses based on their premium volume in the state. Frequently funds are set up in such a way as to have immediate access to assets of the insolvent insurer (rather than waiting until liquidation proceedings are completed). In many states, funds are given priority before general creditors to obtain assets of insolvent insurers. In some states, solvent insurers are permitted tax offsets against money paid into guarantee funds.
Insurance Services Offices
Members: Rating bureaus, actuarial associations and other insurance research groups. Objectives: Provides statistical and actuarial information, policy forms and related services to insurers. Functions as an insurance advisory organization and statistical agent. Publishes rate manuals, plans, policy forms and endorsements and other materials.
Insured
The person whose insurable interest is protected under an insurance policy; the one to whom or at whose direction an insurer reimburses losses, pays benefits, or provides services. The term is generally preferred to policyholder.
Insured Loss Ratio
The ratio that a reinsurer's percentage of losses incurred bears to premiums earned.
Insured Vehicle
A vehicle which is covered by an insurance policy or any vehicle which meets the definition of a covered auto according to the language of the insurance policy.
Insurer
The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
Insuring Agreement
That part of an insurance contract that states the promises of the insurer.
Insuring Clause
The clause which sets forth the type of loss being covered by the policy and the parties to the insurance contract.
Interest
The price for the use of money, expressed as a percentage of the amount borrowed; the charge paid by a borrower to a lender
Inter vivos Trust
An ordinary trust established by a person while living to manage and distribute assets to other living persons. (Inter vivos is Latin for "between the living.")
Intestate
Dying without having made a legal will; a person who has died without leaving a will
Investment Income
An insurance company's earnings from its investment portfolio, including interest, dividends, capital gains, and rent.
Immediate Annuity
An annuity that commences benefit payments immediately after a specified interval (one month or one year). This type of annuity is nearly always purchased with a single premium.
Imputed Negligence
Case in which responsibility for damage can be transferred from the negligent party to another person, such as an employer.
Incurred Claims
Incurred claims equal the claims paid during the policy year plus the claim reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. The difference between the year end and beginning of the year claim reserves is called the increase in reserves and may be added directly to the paid claims to produce the incurred claims.
Indemnification
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity
Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Independent Adjuster
Claims adjuster who offers his or her services to insurance companies and is compensated by a fee.
Independent Agent
An independent contractor who sells insurance usually on behalf of more than one insurance company under the independent agency system. Independent agents operate their own business, own the records of the policies sold through them, and are compensated by commissions or fee.
Indirect Loss
Property loss from a peril that is not the immediate cause of loss; an indirect loss (e.g. a business interruption loss, extra expense, lost rent, etc.) arising out of an insured's inability to use property damaged by another peril.
Inheritance tax
A tax based on an estate's value at the time of the owner's death. A federal unified tax is assessed on the combined value of the estate and qualifying gifts so that estate taxes cannot be avoided by gifts in anticipation of death.
Insolvent
Having insufficient financial resources (assets) to meet financial obligations (liabilities).
Inspection
In property and casualty insurance, the insurer retains the right to make inspections and surveys relating to the insurability of the risk and the premiums charged. The insurer also reserves the right for inspection of property for which a loss arises and claim presented.
Installments
When a policy is placed on a payment plan, multiple equal installments due in the future are created.
Insurability
The risk-associated qualities of a person or entity that meet an insurer's underwriting standards and therefore make the insurer willing to offer coverage at a standard premium.
Insurable Interest
The person who stands to lose financially in the event of a loss. For example, loss to an automobile, home, or contents.
Insurable Risk
A risk that meets the following criteria:
1. The insured loss must have a definite time and place;
2. The insured event must be accidental;
3. The insured must have an insurable interest in the subject of coverage;
4. The insured risks must belong to a sufficiently large group of homogeneous exposure units to make losses predictable;
5. The risk must not be subject to a catastrophic loss where a large number of exposure units can be damaged or destroyed in a single event;
6. The coverage must be provided at a reasonable cost;
7. The chance of loss must be calculable.
Insurance
A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions.
Insurance Adjuster
An insurance company employee who is responsible for settling or adjusting claims.
Insurance Commissioner
The senior official in a state's department of insurance or other insurance regulatory agency.
Insurance Company
An organization chartered to operate as an insurer.
Insurance Examiner
The insurance department representative assigned to audit the books or the market conduct of an insurance company.
Insurance Exchange
An insurance marketplace or organization patterned after Lloyd's of London, formed during the 1980s in New York City, Miami, Florida, and Chicago, Illinois. Exchanges were formed to write large or unique risks, generally on a surplus lines basis, and to write reinsurance business. Both the New York and Florida exchanges have suspended operations.
Insurance Guaranty Funds
Plans established and administered individually at the state level which assess solvent insurers in order to settle the unpaid claims of a insolvent company and to return unearned premiums to its policyholders. Insurers each pay a proportional share of the losses based on their premium volume in the state. Frequently funds are set up in such a way as to have immediate access to assets of the insolvent insurer (rather than waiting until liquidation proceedings are completed). In many states, funds are given priority before general creditors to obtain assets of insolvent insurers. In some states, solvent insurers are permitted tax offsets against money paid into guarantee funds.
Insurance Services Offices
Members: Rating bureaus, actuarial associations and other insurance research groups. Objectives: Provides statistical and actuarial information, policy forms and related services to insurers. Functions as an insurance advisory organization and statistical agent. Publishes rate manuals, plans, policy forms and endorsements and other materials.
Insured
The person whose insurable interest is protected under an insurance policy; the one to whom or at whose direction an insurer reimburses losses, pays benefits, or provides services. The term is generally preferred to policyholder.
Insured Loss Ratio
The ratio that a reinsurer's percentage of losses incurred bears to premiums earned.
Insured Vehicle
A vehicle which is covered by an insurance policy or any vehicle which meets the definition of a covered auto according to the language of the insurance policy.
Insurer
The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
Insuring Agreement
That part of an insurance contract that states the promises of the insurer.
Insuring Clause
The clause which sets forth the type of loss being covered by the policy and the parties to the insurance contract.
Interest
The price for the use of money, expressed as a percentage of the amount borrowed; the charge paid by a borrower to a lender
Inter vivos Trust
An ordinary trust established by a person while living to manage and distribute assets to other living persons. (Inter vivos is Latin for "between the living.")
Intestate
Dying without having made a legal will; a person who has died without leaving a will
Investment Income
An insurance company's earnings from its investment portfolio, including interest, dividends, capital gains, and rent.
Insurance Information
Lapse
Insurance policy termination due to the insured's failure to make premium payments.
Larceny
Theft other than one involving a forcible entry (burglary) or an actual or threatened bodily harm (robbery). Many jurisdictions prefer the term theft.
Last Clear Chance Rule
The last reasonable opportunity to avoid an accident or injury. One who has the last clear chance to avoid an injury and fails to do so is usually held solely responsible, notwithstanding the injured person's own contributory negligence.
Law of Large Numbers
A principle that the larger the number of exposures considered, the more closely will reported losses equal the true probability of loss. This is the basis for the statistical expectation of loss, which determines premium rates.
Legal Reserve
Minimum reserves required by state law or regulation that life insurers must maintain to operate in that state.
Liability
An actual or potential legal obligation, duty, debt, or responsibility to another person; the obligation to compensate, in whole or part, a person harmed by one's acts or omissions. Liability insurance policies provide coverage for an insured's legal liability, excluding criminal acts, most intentional torts, and breach of contract.
Liability Insurance
Insurance that provides indemnity or compensation for a harm or wrong to a third party for which the insured is legally obligated to pay. Usually, the injury or damage is caused by the insured's negligent acts or omissions, but in some situations the law imposes strict liability without regard to negligence, and this may also be covered by liability insurance.
Liability Limits
The stipulated sum or sums beyond which an insurance company is not liable to protect the insured.
License
Legal authority granted by the state for a specified activity or business enterprise. State insurance departments grant licenses to insurance companies, agents, brokers, and other entities to transact insurance-related business within its borders.
License Bond
A bond guaranteeing that a person who has been issued a license will comply with the laws, regulations, and ordinances associated with the issuance of the license.
Lienholder
The financial institution that holds title of a vehicle until the loan is paid off.
Life Expectancy
The length of time a person of a given age can be expected to live, based on mortality tables.
Limited Collision
Physical damage protection for the insured's vehicle when damage results from impact with another object or upset. Paid ONLY if insured is LESS than 50% at fault. No deductible applies. Coverage only available in state of Michigan.
Liquidation
The conversion of an insolvent organization's assets into cash in order to pay creditors. An insurance department takes this action after it has determined that an insolvent insurer cannot be rehabilitated. Its business is wound up, and any remaining assets are used to pay policyholder claims and other creditors.
Liquor Liability Law
State or local statutes ("dram shop acts") that establish the liability of a business that sells or serves alcoholic beverages to customers for injuries caused by intoxicated customers to third parties. Laws sometimes also include people who serve alcohol to guests.
Living Trust
An ordinary trust established by a person while living to manage and distribute assets to other living persons.
Long-Term Care
Custodial care provided by a rehabilitation facility, nursing home or mental hospital on a continuum basis for chronically ill, disabled or retarded individuals. The care may be on an inpatient, outpatient, or at-home basis.
Loss
The happening of the event for which insurance pays. The amount the insurer is required to pay because of a happening against which it has insured.
Loss Avoidance
The elimination of a loss exposure by ceasing or never undertaking an activity that produces the exposure. In making this decision, the person or organization must weigh the potential value of the activity against the potential loss.
Loss Control
Prevention and reduction of losses. An insured, often in consultation with an underwriter or loss control specialist, takes measures to reduce the frequency of losses and to minimize the financial impact or severity of a loss.
Loss Expense - Allocated
An expense assigned to and recorded with a specific claim, including defense and investigation costs. Allocated claim expenses have more significance in liability insurance because of the legal costs involved in defending liability claims.
Loss Expense - Unallocated
An expense that cannot be assigned to and recorded with a specific claim. This includes claim department operating expenses such as rent, heat and electricity, and other overhead expenses.
Loss of Use / Services
Applies to a policyholder's exposure to financial loss if the part of the residence premises where the insured lives is damaged so badly that it is "not fit to live in".
Loss Payable Clause
A property insurance policy provision that authorizes the insurer to make a loss payment to a person (loss payee) other than the insured to the extent that the loss payee has an insurable interest in the property.
Loss Prevention
Measures designed to reduce the probability that a loss will occur. See also loss prevention services and loss reduction.
Loss Prevention Services
Survey, consultation, or loss control management services provided to policholders by an insurer to reduce the likelihood of accidents.
Loss Ratio
A formula used by insurers to relate loss expenses to income. Formula: (incurred losses + loss adjustment expenses) divided by earned premiums. See also accident year statistics, burning ratio, expected loss ratio, insured loss ratio.
Loss Reduction
A loss control measure designed to reduce the severity of loss occurrences.
Loss Reserve
An insurer's estimate of the amount an individual claim will ultimately cost. On an insurer's financial statement, it is the amount of estimated liabilities for known claims not yet paid and incurred but not reported claims.
Lapse
Insurance policy termination due to the insured's failure to make premium payments.
Larceny
Theft other than one involving a forcible entry (burglary) or an actual or threatened bodily harm (robbery). Many jurisdictions prefer the term theft.
Last Clear Chance Rule
The last reasonable opportunity to avoid an accident or injury. One who has the last clear chance to avoid an injury and fails to do so is usually held solely responsible, notwithstanding the injured person's own contributory negligence.
Law of Large Numbers
A principle that the larger the number of exposures considered, the more closely will reported losses equal the true probability of loss. This is the basis for the statistical expectation of loss, which determines premium rates.
Legal Reserve
Minimum reserves required by state law or regulation that life insurers must maintain to operate in that state.
Liability
An actual or potential legal obligation, duty, debt, or responsibility to another person; the obligation to compensate, in whole or part, a person harmed by one's acts or omissions. Liability insurance policies provide coverage for an insured's legal liability, excluding criminal acts, most intentional torts, and breach of contract.
Liability Insurance
Insurance that provides indemnity or compensation for a harm or wrong to a third party for which the insured is legally obligated to pay. Usually, the injury or damage is caused by the insured's negligent acts or omissions, but in some situations the law imposes strict liability without regard to negligence, and this may also be covered by liability insurance.
Liability Limits
The stipulated sum or sums beyond which an insurance company is not liable to protect the insured.
License
Legal authority granted by the state for a specified activity or business enterprise. State insurance departments grant licenses to insurance companies, agents, brokers, and other entities to transact insurance-related business within its borders.
License Bond
A bond guaranteeing that a person who has been issued a license will comply with the laws, regulations, and ordinances associated with the issuance of the license.
Lienholder
The financial institution that holds title of a vehicle until the loan is paid off.
Life Expectancy
The length of time a person of a given age can be expected to live, based on mortality tables.
Limited Collision
Physical damage protection for the insured's vehicle when damage results from impact with another object or upset. Paid ONLY if insured is LESS than 50% at fault. No deductible applies. Coverage only available in state of Michigan.
Liquidation
The conversion of an insolvent organization's assets into cash in order to pay creditors. An insurance department takes this action after it has determined that an insolvent insurer cannot be rehabilitated. Its business is wound up, and any remaining assets are used to pay policyholder claims and other creditors.
Liquor Liability Law
State or local statutes ("dram shop acts") that establish the liability of a business that sells or serves alcoholic beverages to customers for injuries caused by intoxicated customers to third parties. Laws sometimes also include people who serve alcohol to guests.
Living Trust
An ordinary trust established by a person while living to manage and distribute assets to other living persons.
Long-Term Care
Custodial care provided by a rehabilitation facility, nursing home or mental hospital on a continuum basis for chronically ill, disabled or retarded individuals. The care may be on an inpatient, outpatient, or at-home basis.
Loss
The happening of the event for which insurance pays. The amount the insurer is required to pay because of a happening against which it has insured.
Loss Avoidance
The elimination of a loss exposure by ceasing or never undertaking an activity that produces the exposure. In making this decision, the person or organization must weigh the potential value of the activity against the potential loss.
Loss Control
Prevention and reduction of losses. An insured, often in consultation with an underwriter or loss control specialist, takes measures to reduce the frequency of losses and to minimize the financial impact or severity of a loss.
Loss Expense - Allocated
An expense assigned to and recorded with a specific claim, including defense and investigation costs. Allocated claim expenses have more significance in liability insurance because of the legal costs involved in defending liability claims.
Loss Expense - Unallocated
An expense that cannot be assigned to and recorded with a specific claim. This includes claim department operating expenses such as rent, heat and electricity, and other overhead expenses.
Loss of Use / Services
Applies to a policyholder's exposure to financial loss if the part of the residence premises where the insured lives is damaged so badly that it is "not fit to live in".
Loss Payable Clause
A property insurance policy provision that authorizes the insurer to make a loss payment to a person (loss payee) other than the insured to the extent that the loss payee has an insurable interest in the property.
Loss Prevention
Measures designed to reduce the probability that a loss will occur. See also loss prevention services and loss reduction.
Loss Prevention Services
Survey, consultation, or loss control management services provided to policholders by an insurer to reduce the likelihood of accidents.
Loss Ratio
A formula used by insurers to relate loss expenses to income. Formula: (incurred losses + loss adjustment expenses) divided by earned premiums. See also accident year statistics, burning ratio, expected loss ratio, insured loss ratio.
Loss Reduction
A loss control measure designed to reduce the severity of loss occurrences.
Loss Reserve
An insurer's estimate of the amount an individual claim will ultimately cost. On an insurer's financial statement, it is the amount of estimated liabilities for known claims not yet paid and incurred but not reported claims.
Insurance Information (cont'd)
Rate
The pricing factor upon which the insurance buyer's premium is based.
Rated Policy
Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has impaired health or a hazardous occupation.
Ratemaking
The statistical process by which insurers determine risks and pricing for the basic classes of insurance.
Rating Territory
A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.
Reasonable and Customary Charge
A charge for health care, which is consistent with the going rate or charge in a certain geographical area for identical or similar services.
Rebating
Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is prohibited by law.
Recurring Claim Provision
A provision in some health insurance policies which specifies a length of time during which the recurrence of a condition is considered to be a continuation of a previous period of disability or hospital confinement.
Recurring Clause
A provision in some health insurance policies, which specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.
Reduced Paid-up Insurance
A form of insurance available as a nonforfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount.
Regulation
Supervision of business practices by a governmental entity.
Rehabilitation
(1) Restoration of a totally disabled person to a meaningful occupation, (2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.
Reimbursement
The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.
Reinstatement
The resumption of coverage under a policy which has lapsed.
Reinsurance
Assumption by one insurance company of all or part of a risk undertaken by another insurance company.
Reinsurance Facility
An alternative mechanism to service those insureds that cannot obtain insurance in the voluntary market. Premiums and losses for the business that is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market.
Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.
Renewal
Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.
Renter's Policy
A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.
Replacement
The substitution of health insurance coverage from one policy contract to another.
Replacement Cost
The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. (See Actual Cash Value)
Replacement ratio
The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.
Representation
Statements made by an applicant in the application, which he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.
Rescission
Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses but takes effect as of the date of issue of the policy, thus voiding the contract from its inception.
Reservation of Rights
An arrangement whereby an insurer defends a case without commitment to provide coverage in the event that the facts disclosed during the trial reveal that the occurrence is not covered.
Reserve
(1) An amount representing liabilities kept by an insurer to provide for future commitments under policies outstanding. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund.
Residual Disability
A period of partial disability that immediately follows a period of total disability. Benefits for residual disability are paid on a pro-rata basis, depending on the percentage of earnings loss.
Residual Disability Benefits
A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.
Residual Market
A system through which insurance is made available to buyers that represent unusually high risks.
Retention
The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
Retrocession
The process by which a reinsurer obtains reinsurance from another company.
Retrospective Date
The first date for which claims will be paid under a claims-made policy of liability insurance.
Retrospective Rating
Rating procedure which allows adjustment of an insured's final rate on the basis of the insured's own loss experience.
Revocable Trust
A trust that can be terminated or revoked by its creator.
Rider
A special policy provision or group of provisions that may be added to a policy to expand or limit the benefits otherwise payable.
Right of Survivorship
At the death of one co-owner of property, that person's interest in the property automatically passes to the surviving joint tenant or tenants.
Risk
The chance of loss. Also used to refer to the insured or to property covered by a policy. A term used to refer to a person or the peril insured.
Risk Classification
The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. (See - Underwriting)
Risk Control
Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.
Risk Retention Group
An alternative form of insurance in which members of a similar profession or business band together to self insure their risks.
Robbery
The taking of property from a person by force or threat of violence.
Rollover
Transfer of IRA or other qualified pension funds from one financial institution (trustee) to another.
Rate
The pricing factor upon which the insurance buyer's premium is based.
Rated Policy
Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has impaired health or a hazardous occupation.
Ratemaking
The statistical process by which insurers determine risks and pricing for the basic classes of insurance.
Rating Territory
A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.
Reasonable and Customary Charge
A charge for health care, which is consistent with the going rate or charge in a certain geographical area for identical or similar services.
Rebating
Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is prohibited by law.
Recurring Claim Provision
A provision in some health insurance policies which specifies a length of time during which the recurrence of a condition is considered to be a continuation of a previous period of disability or hospital confinement.
Recurring Clause
A provision in some health insurance policies, which specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.
Reduced Paid-up Insurance
A form of insurance available as a nonforfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount.
Regulation
Supervision of business practices by a governmental entity.
Rehabilitation
(1) Restoration of a totally disabled person to a meaningful occupation, (2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.
Reimbursement
The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.
Reinstatement
The resumption of coverage under a policy which has lapsed.
Reinsurance
Assumption by one insurance company of all or part of a risk undertaken by another insurance company.
Reinsurance Facility
An alternative mechanism to service those insureds that cannot obtain insurance in the voluntary market. Premiums and losses for the business that is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market.
Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.
Renewal
Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.
Renter's Policy
A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.
Replacement
The substitution of health insurance coverage from one policy contract to another.
Replacement Cost
The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. (See Actual Cash Value)
Replacement ratio
The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.
Representation
Statements made by an applicant in the application, which he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.
Rescission
Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses but takes effect as of the date of issue of the policy, thus voiding the contract from its inception.
Reservation of Rights
An arrangement whereby an insurer defends a case without commitment to provide coverage in the event that the facts disclosed during the trial reveal that the occurrence is not covered.
Reserve
(1) An amount representing liabilities kept by an insurer to provide for future commitments under policies outstanding. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund.
Residual Disability
A period of partial disability that immediately follows a period of total disability. Benefits for residual disability are paid on a pro-rata basis, depending on the percentage of earnings loss.
Residual Disability Benefits
A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.
Residual Market
A system through which insurance is made available to buyers that represent unusually high risks.
Retention
The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
Retrocession
The process by which a reinsurer obtains reinsurance from another company.
Retrospective Date
The first date for which claims will be paid under a claims-made policy of liability insurance.
Retrospective Rating
Rating procedure which allows adjustment of an insured's final rate on the basis of the insured's own loss experience.
Revocable Trust
A trust that can be terminated or revoked by its creator.
Rider
A special policy provision or group of provisions that may be added to a policy to expand or limit the benefits otherwise payable.
Right of Survivorship
At the death of one co-owner of property, that person's interest in the property automatically passes to the surviving joint tenant or tenants.
Risk
The chance of loss. Also used to refer to the insured or to property covered by a policy. A term used to refer to a person or the peril insured.
Risk Classification
The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. (See - Underwriting)
Risk Control
Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.
Risk Retention Group
An alternative form of insurance in which members of a similar profession or business band together to self insure their risks.
Robbery
The taking of property from a person by force or threat of violence.
Rollover
Transfer of IRA or other qualified pension funds from one financial institution (trustee) to another.
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