Insurance Glossary: A

Question: What is Accident?

Answer: An accident is an unintended, unforeseen, unfortunate and unexpected event; an event that could not be considered as intentional; an event that could not be considered a consequence of an undertaking; a mishap or casualty that typically results in damage or injury.

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Question: What is an Accidental Death Benefit?

Answer: An accidental death benefit is an additional clause or rider to a life insurance policy. It is a payment due to the beneficiary of the policy in the instance of accidental death.

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Question: What is Accidental Death Insurance?

Answer: Accidental death insurance is a limited form of life insurance that is less expensive. It pays the beneficiary of the policy only if the insured died due to an accident. Common exclusions are death due to war, suicide, illness, and radiation.

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Question: What is Accidental Means?

Answer: Accidental means is an unintentional cause that leads to bodily injury. Accidental death benefit covers death by accidental means rather than natural causes.

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Question: What is Actual Cash Value?

Answer: Actual cash value is a method of placing a value on insured property that takes into consideration at least some of the following factors: replacement value less depreciation, fair market value, rent, occupancy, and location, or simply stated, it is the replacement cost, new, at time of loss, less depreciation.

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Question: What is an Additional Death Benefit?

Answer: A life insurance additional death benefit is for when the death occurs during a specific time period or as the result of specific causes. This is an additional payment separate from the original death benefit.

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Question: What is an Additional Deposit Provision?

Answer: An additional deposit provision is a clause in some whole life insurance policies in which the insured can make unscheduled premium payments. This provision is common in policies that pay variable rates of interest on deposit premiums or allow for the purchase of additional insurance coverage.

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Question: What is an Additional Insured?

Answer: An additional insured is an additional party that enjoys the benefits of the insured’s policy. Usually the additional insured is specified as a tenant, family member, or spouse. Other times it will include anyone who is, as in the case of car insurance, driving the vehicle with the insured’s permission

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Question: What is an Additional Living Expense Insurance?

Answer: An additional living expense insurance is an increase in living cost typically covered by an insurance policy while the insured’s dwelling is repaired for a covered loss. Much like additional expense under a business policy.

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Question: What is an Additional Named Insured?

Answer: Additional named insured are person(s), other than the first named insured, shown as an insured in the policy declarations or in an addendum to the policy, or by endorsement once the policy has been issued. The additional person usually has same status as the named insured in such things as notification of cancellation.

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Question: What is an Adjustable Life Insurance Policy?

Answer: In an adjustable life insurance policy, the insured can change the amount of their insurance coverage or premium payments. If the insured increases premium payments while keeping the same amount of coverage, it will result the accumulation of additional cash. Decreasing premium payments while keeping coverage the same means less cash accumulation. This will result in a policy that resembles term life insurance. Flexible premium adjustable life insurance is also called universal life insurance.

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Question: What is Adjustment Income?

Answer: Adjustment income is a life insurance benefit that provides the policy beneficiary with income in the event of the insured’s death. The money is intended to provide financial support during the interim period while the beneficiary arranges their living finances.

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Question: What is an Administrator?

Answer: An administrator is the person appointed by the court to administer the estate and affairs of the deceased person. If there is no will, no executor named in the will, or the executor cannot or will not fulfill the necessary duties, then an administrator is appointed.

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Question: What is Advance Funding?

Answer: Advance funding means that a pension plan sponsor deposits money into a fund during the employee’s working years. This ensures the payment of plan benefits once the plan holder retires.

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Question: What is an Advance Premium?

Answer: Advance premium is the initial premium charged as a provisional or deposit premium at policy inception, with the final premium determined after the policy expiration, usually by some sort of audit procedure. Mainly found in commercial policies.

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Question: What is Adverse Selection?

Answer: An adverse selection is a normal market process, when an insurance company insures risks with a higher probability of loss than expected by the actuaries, the selection of such risks is adverse because the rate is less than what is needed to make a profit. Also known as anti-selection. Adverse selection occurs when mistakes are made in rate promulgation or in establishing underwriting criteria. The market will find the best value, if a mistake is made, the market will find it.

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Question: What is an Affiliation of Health Providers?

Answer: An affiliation of health providers is a collaboration in order to offer health care coverage collectively to a specific group of people.

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Question: What is an Affinity Group?

Answer: An affinity group is a group formed around a common interest, which is then turned into an association with formal or informal membership. This can be based on hobbies, jobs, and clubs. An insurance company then recognizes the existence of the association and markets products to the entire group, rather than its individual members.

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Question: What is Aftercare?

Answer: Aftercare is care given to a patient after they have received surgery, experienced an accident, or illness.

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Question: What is an Age Adjustment Clause?

Answer: An age adjustment clause is when the insured misrepresents their age. When it is proven, the life insurance company may adjust the death benefit payments of the policy.

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Question: What is Age Change?

Answer: Age change is when life and health insurance companies use procedures to determine the age of the policy holder. For life insurance, it’s usually the date halfway between the insured’s natural birthdays. For health insurance, the company uses the insured’s previous birthday. The age of the insured affects the rates and benefits of the policy.

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Question: What are Age Limits?

Answer: Age limits are the minimum and maximum ages set by the insurance company to determine whether or not an insured is eligible for the insurance policy or coverage. If the person is already insured, the maximum limit determines whether or not they can renew when the policy term ends.

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Question: What is an Agency?

Answer: An agency is a business primarily involved in the sale of insurance. An independent agent typically operates an Agency within the scope of authority specified in the agency contracts or agreements with several insurance companies.

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Question: What is an Agent?

Answer: An agent is a person who has the authority to act for another. A person who legally sells insurance. An Insurance company enters into a contract or agreement with the agent granted many of the powers held by the company. This relationship varies greatly by insurance company.

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Question: What is an Agent of Record?

Answer: An agent of record is a simple letter that a new agent issues to an insurer stating that he or she has been authorized to take over an insurance account.  It allows the company to change its contract terms. Also known as a broker of record letter.

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Question: What is Agents Errors and Omissions Insurance?

Answer: Agents errors and omissions insurance is a form of professional liability insurance designed for insurance agents covering erroneous acts, or failure to perform duties.

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Question: What is an Agent’s License?

Answer: An agent’s license is issued by the state indicating that an agent or agency has met the requirements and has the expressed authority to conduct the specified lines of business for the time period indicated.  Agents are required to qualify for a license by tests. Many licenses must be renewed annually with proof of professional education course completion. For example, to properly insure a home an agent may be required by the state to hold a fire license, or in some states a “property and casualty” license.

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Question: What is Aggregate Limit?

Answer: An aggregate limit is the maximum amount the insurer will pay during the policy period, irrespective of the policy’s various limits of liability but the policy must contain this language to such a limit.

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Question: What is Agreed Amount?

Answer: The agreed amount of the value of the property held by the insured at the time when the insurance is purchased. The amount has to be agreed upon by the insured and insurer.

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Question: What is an Agreed Amount Clause?

Answer: In an agreed amount clause, the insurer agrees to waive the coinsurance requirement of the property insurance. The insurer will require the insured to maintain insurance at the same amount as when the policy began and have also agreed on value.

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Question: What are Allocated Benefits?

Answer: Allocated benefits are payments that comes from a defined benefit pension plan.

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Question: What is the American Agency System?

Answer: The American Agency System contracts insurance companies with agents who are independent contractors to sell property-liability insurance, to issue policies, to own the expiration records thereof, and in general to represent the companies in their communities.  Agents are able to represent many companies.  The system in The United States is considered to be at its highest development, hence “American” agency system. Agents receive commission rather than salary.

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Question: What is Amount of Insurance?

Answer: The amount of insurance is the most an insurer will pay for any single loss based on the terms of a specific policy. This is also known as the maximum amount an insured can collect in a loss settlement.

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Question: What is Amount at Risk?

Answer: In a whole life insurance policy, the amount at risk is the amount the insurer pays to the beneficiary in the event of the insured’s death. It is calculated by subtracting  the cash value from the actual face value of the policy.

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Question: What is Animal Mortality Insurance?

Answer: Animal mortality insurance is a type of animal “life insurance” providing recovery for the death of the specified animal for any cause, unless otherwise excluded.  Coverage is normally very broad and there are very few exclusions.

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Question: What is Annual Election Period?

Answer: Annual Election Period or AEP is a period of time from October 15 to December 7 during which you’re allowed to change your Medical Prescription Drug Coverage. It is also an opportunity to enroll in Medicare Part D if you missed your initial enrollment period.

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Question: What is Annual Renewable Term Insurance?

Answer: Also known as yearly renewable term insurance, annual renewable term insurance can be held for a set number of years without requiring the insured to prove insurability. The policy premium increases each year.

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Question: What is Annualization?

Answer: The insurer can re-rate an insurance policy on each renewal date using the newer rates. An annualization is a provision of multi-year policies.

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Question: What is an Annuity?

Answer: An annuity is a method of receiving funding from a retirement policy. The annuitant (individual) can set up the payments on a regular/monthly basis for a defined period or until their death. If the annuitant dies with funds remaining, a lump sum can be paid to a beneficiary.

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Question: What is an Annuity Period?

Answer: In a retirement plan, an annuity period is the period between each payment.

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Question: What is an Anti-Rebate Law?

Answer: In an anti-rebate law, the insurer may not provide the commission from a policy as incentive for the insured to purchase the said policy.

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Question: What is an Applicant?

Answer: An applicant is the person who actually applies for insurance. Does not have to be the insured as long as he or she has an insurable interest at the time the application is taken.

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Question: What is an Application?

Answer: When required, an application is a written statement by a prospective policyholder which gives information the company relies upon when underwriting, rating, and issuing the insurance.  In England this is referred to as a proposal.

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Question: What is Appointment?

Answer: An appointment is when an insurance company authorizes an agent to act on that company’s behalf.

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Question: What is an Appraiser?

Answer: An appraiser is a person who determines the value of property and/or also determines the amount of a disputed loss.

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Question: What is Appreciation?

Answer: Appreciation is the amount property has increased in value since last valued.

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Question: What is Arson?

Answer: Arson is the intentional destruction of property, often through the use of fire, usually in an attempt to defraud an insurance company.

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Question: What is Arson Fraud?

Answer: Arson fraud is the intentional destruction of property by fire or other means, either committed by the insured or by direction of the insured for the purpose of collecting insurance proceeds by the insured.

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Question: What is an Assigned Risk Plan?

Answer: An assigned risk plan is an association of insurers in a given state in which risks which are unable to get insurance in the voluntary market are shared among subscribing insurers, in proportion to the amount subscribing insurers write in that state.  All companies writing this “class” in the specific state are statutorily required to participate in this activity.

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Question: What is an Assignee?

Answer: In a life insurance policy, an assignee is the person assigned to the contractual rights or policy proceeds. There can be collateral assignees (creditors) and absolute assignees (irrevocable).

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Question: What is Assignment of Benefits?

Answer: In health insurance, the insured can have the health care provider bill and receive payment directly from the insurer through the assignment of benefits. The bill is paid, minus the deductible, and the balance is paid by the insured.

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Question: What is an Assignor?

Answer: An assignor is a person or party that has the right to assign the benefits or rights to the assignee.

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Question: What is Assumption of Risk?

Answer: An assumption of risk is a common law defense used by employers where an employee assumes the risks for the hazards normally associated with a type of employment when that employee accepts employment. Not available with workers compensation laws. Also common law defense against torts when plaintiff is held to have known the risk and accepted it prior to loss.

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Question: Who is an Assured?

Answer: An assured is a person or party covered by an insurance policy. He or she is the ”insured” or policyholder.

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Question: What is an Attractive Nuisance?

Answer: An attractive nuisance is a condition which, although normally harmless, may nevertheless attract those (normally but not necessarily children) who do not understand its hazards and may cause injury. Although it may be proper to maintain such a condition, the owner is nevertheless required to take such means as may be necessary to prevent its causing injury to innocent people. A residential swimming pool that isn’t surrounded by an adequate fence might be considered an attractive nuisance. When deemed an attractive nuisance normal trespassing laws may not apply.

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Question: What is an Audit?

Answer: An audit is an examination and verification of books or accounts to determine their accuracy.  Certain policies written on a reporting or adjustable form give the insurer the privilege of auditing the policyholder’s records to verify the accuracy of the premiums paid. For example; if a policy premium is based on sales the insurance company will often verify actual sales after the policy has expired. This could result in a return premium or an additional premium due.

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Question: What is Automobile Death and Disability Coverage?

Answer: Automobile death and disability coverage is form of accident insurance coverage available under a private passenger automobile liability policy where the insurer pays a principal sum for accidental death, stated benefits for specific injuries, (such as loss of limbs, fractures, etc.) and weekly indemnity for total disability.  Covers accidents while traveling in an automobile, including getting in and out of, or by being struck by an automobile.  Usually, an extra premium is charged for this coverage and it is available to the policyholder, a spouse, or any other named person. Not available in all states.

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Question: What is an Automobile Fleet?

Answer: An automobile fleet is a group of vehicles, normally commercially owned or leased by the insured. May get special rate treatment depending on size and usage.

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Question: What is Automobile Insurance?

Answer: Automobile insurance is for the ownership, maintenance, or use of automobiles.

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Question: What is an Automobile Liability Excess Policy?

Answer: An automobile liability excess policy has excess limits for bodily injury and property damage liability for persons unable to secure the limits they desire or need through their basic automobile liability insurance.  It can be purchased primarily by assigned risk plan policyholders or those requiring very high limits, the excess insurance always stipulates that the primary policy must be kept in force.

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Question: What is Automobile Liability Insurance?

Answer:  An automobile liability insurance policy provides protection for loss by bodily injury or damage to property of others caused by accidents arising out of ownership, maintenance, or use of an automobile.

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Question: What is Automobile Medical Payments Insurance?

Answer: Automobile medical payments insurance is optional coverage available under an automobile liability policy which pays the medical expenses of the policy holder and any of the passengers injured by (in or on or in the use of) an insured automobile, irrespective of who was responsible for the accident. In some no-fault states, medical payments insurance is known by personal injury protection (PIP); in other states, it may supplement no-fault insurance.

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Question: What is Automobile Physical Damage Insurance?

Answer: Automobile physical damage insurance covers material loss or damage to the policyholder’s automobile.

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Question: What is Average Indexed Monthly Earnings (AIME)?

Answer: Average Indexed Monthly Earnings (AIME) is the formula used by the Social Security Administration to determine individual benefit amounts. It includes the person’s earned income and total social security taxes paid while working.

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Question: What is All-Risk Insurance?

Answer: All-risk insurance is an out-of-date term used to describe property coverage under which all losses are covered that aren’t specifically excluded by the contract. This coverage is now known as “Open Perils” or “Special Perils”. The term “all-risk” is no longer used because it implied more coverage than the contract actually provides.

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