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Glossary
Table of Contents
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 | Cafeteria Plan: Generic term for an employee
benefit plan that allows employees to select among the various group life,
medical expense, disability, dental, and other plans that best meet their
specific needs. Also called flexible benefit plans.
| Calendar-year Deductible: Amount
payable by an insured during a calendar year before a group or individual
health insurance policy begins to pay for medical expenses.
| Cancelable: A contract of health insurance that
may be canceled during the policy term by the insurer or insured.
| Cancellation: The discontinuance of an
insurance policy before its normal expiration date, either by the insured or
the company.
| Capacity: The amount of capital available to an
insurance company or to the industry as a whole for underwriting general
insurance coverage or coverage for specific perils.
| Capital Gain: Profit realized on the sale of
securities. An unrealized capital gain is an increase in the value of
securities that have not been sold.
| Capital Retention Approach: A
method used to estimate the amount of life insurance to own. Under this
method, the insurance proceeds are retained and are not liquidated.
| Capitation: A method of payment for health
services in which a physician or hospital is paid a fixed, per capita amount
for each person served regardless of the actual number of services provided
to each person.
| Captive Insurance Company: A
company owned solely or in large part by one or more non- insurance entities
for the primary purpose of providing insurance coverage to the owner or
owners.
| Captive Insurer: Insurance company
established and owned by a parent firm in order to insure its loss exposures
while reducing premium costs, providing easier access to a reinsurer, and
perhaps easing tax burdens. See also Association captive; Pure captive.
| Cargo Insurance: Type of ocean marine
insurance that protects the shipper of the goods against financial loss if
the goods are damaged or lost.
| Career average formula: A pension
plan formula that bases retirement benefits on earnings during all years of
service to the employer.
| Cash Surrender Value: The amount
available in cash upon voluntary termination of a policy by its owner before
it becomes payable by death or maturity.
| Casualty Insurance: Insurance concerned
with the insured's legal liability for injuries to others or damage to other
persons' property; also encompasses such forms of insurance as plate glass,
burglary, robbery and workers' compensation.
| Catastrophe: Event which causes a loss of
extraordinary magnitude, such as a hurricane or tornado.
| Causes-of-loss Form: Form added to
commercial property insurance policy that indicates the causes of loss that
are covered. There are four causes-of-loss forms: basic, broad, special, and
earthquake.
| Cede: To transfer all or part of a risk written by an
insurer (the ceding, or primary company) to a reinsurer.
| Certificate of Insurance: A
statement of coverage issued to an individual insured under a group
insurance contract, outlining the insurance benefits and principal
provisions applicable to the member.
| Certified Financial Planner (CFP):
Professional who has attained a high degree of technical competency in
financial planning and has passed a series of professional examinations by
the College of Financial Planning.
| Certified Insurance
Counselor (CIC): Professional in property and liability insurance who
has passed a series of examinations by the Society of Certified Insurance
Counselors.
| Cession: Amount of the insurance ceded to a
reinsurer by the original insuring company in a reinsurance operation.
| Change of Occupation Clause:
Provision in a health insurance policy stipulating that if the insured
changes to a more hazardous occupation, the benefits are reduced based on
the amount of benefits the premium would have purchased for the more
hazardous occupation.
| Chartered Financial
Consultant (ChFC): An individual who has attained a high degree of
technical competency in the fields of financial planning, investments, and
life and health insurance and has passed ten professional examinations
administered by The American College.
| Chartered Life Underwriter (CLU):
An individual who has attained a high degree of technical competency in the
fields of life and health insurance and who is expected to abide by a code
of ethics. Must have minimum of three years of experience in life or health
insurance sales and have passed ten professional examinations administered
by The American College.
| Chartered
Property and Casualty Underwriter (CPCU): Professional who has attained
a high degree of technical competency in property and liability insurance
and has passed ten professional examinations administered by the American
Institute for Property and Liability Underwriters.
| Choice No-Fault: Allows auto insureds the
choice of remaining under the tort system or choosing no-fault at a reduced
premium.
| Claim: A request for payment of a loss which may come
under the terms of an insurance contract.
| Civil
law: the portion of law that deals with interactions between individual.
The two branches of civil law are contract
law and tort
law.
| Claims Adjustor: Person who settles claims:
an agent, company adjustor, independent adjustor, adjustment bureau, or
public adjustor.
| Claim-made policy: A liability insurance
policy under which coverage applies to claims filed during the policy
period.
| Class Rating: Rate-making method in which
similar insureds are placed in the same underwriting class and each is
charged the same rate. Also called manual rating.
| Cliff vesting: a pension design in which an
employee becomes entitled to full retirement benefits after participating in
the plan for the specified period, e.g., five years.
| CLU: See Chartered Life Underwriter.
| Coinsurance: 1) A provision under which an
insured who carries less than the stipulated percentage of insurance to
value, will receive a loss payment that is limited to the same ratio which
the amount of insurance bears to the amount required; 2) a policy provision
frequently found in medical insurance, by which the insured person and the
insurer share the covered losses under a policy in a specified ratio, i.e.,
80 percent by the insurer and 20 percent by the insured.
| Collateral Source Rule: Under this
rule, the defendant cannot introduce any evidence that shows the injured
party has received compensation from other collateral sources.
| Collision Insurance: Protection against
loss resulting from any damage to the policyholder's car caused by collision
with another vehicle or object, or by upset of the insured car, whether it
was the insured's fault or not.
| Combined Ratio: Basically, a measure of the
relationship between dollars spent for claims and expenses and premium
dollars taken in; more specifically, the sum of the ratio of losses incurred
to premiums earned and the ratio of commissions and expenses incurred to
premiums written. A ratio above 100 means that for every premium dollar
taken in, more than a dollar went for losses, expenses, and commissions.
| Commercial General
Liability Policy (CGL): Commercial liability policy drafted by the
Insurance Services Office containing two coverage forms-an occurrence form
and a claims-made form.
| Commercial Lines: Insurance for businesses,
organizations, institutions, governmental agencies, and other commercial
establishments.
| Commercial Multiple Peril
Policy: A package of insurance that includes a wide range of essential
coverages for the commercial establishment.
| Commercial Package Policy (CPP):
A commercial policy that can be designed to meet the specific insurance
needs of business firms. Property and liability coverage forms are combined
to form a single policy.
| Commission: The part of an insurance premium paid
by the insurer to an agent or broker for his services in procuring and
servicing the insurance.
| Commissioner: A state officer who administers
the state's insurance laws and regulations. In some states, this regulator
is called the director or superintendent of insurance.
| Common law: the law that has evolved over time
as a result of previous court decisions, rather than having been enacted by
a legislative body
| Common Stock: Securities that represent an
ownership interest in a corporation.
| Community Property: A special ownership
form requiring that one-half of all property earned by a husband or wife
during marriage belongs to each. Community property laws do not generally
apply to property acquired by gift, by will, or by descent.
| Company Adjustor: Claims adjustor who is a
salaried employee representing only one company.
| Comparative Negligence: Under this
concept a plaintiff (the person bringing suit) may recover damages even
though guilty of some negligence. His or her recovery, however, is reduced
by the amount or percent of that negligence.
| Completed Operations: Liability arising
out of faulty work performed away from the premises after the work or
operations are completed. Applicable to contractors, plumbers, electricians,
repair shops, and similar firms.
| Comprehensive Automobile
Insurance: Protection against loss resulting from damage to the insured
auto, other than loss by collision or upset.
| Comprehensive Major
Medical Insurance: A policy designed to give the protection offered by
both a basic and a major medical health insurance policy. It is
characterized by a low deductible amount, a coinsurance feature, and high
maximum benefits.
| Comprehensive Medical
Expense Insurance: A form of health insurance which provides, in one
policy, protection for both basic hospital expense and major medical expense
coverages. The major medical part of a comprehensive policy is characterized
by a deductible amount, coinsurance, and high maximum benefits.
| Comprehensive Personal
Liability Insurance: Protection against loss arising out of legal
liability to pay money for damage or injury to others for which the insured
is responsible. It does not include automobile or business operation
liabilities.
| Compulsory Auto Liability
Insurance: Insurance laws in some states required motorists to carry at
least certain minimum auto coverages. This is called "compulsory"
insurance.
| Compulsory Insurance: Any form of
insurance which is required by law.
| Compulsory Insurance Law: Law
protecting accident victims against irresponsible motorists by requiring
owners and operators of automobiles to carry certain amounts of liability
insurance in order to license the vehicle and drive legally within the
state.
| Concealment: Deliberate failure of an applicant
for insurance to reveal a material fact to the insurer.
| Concurrent Causation: Legal doctrine
that states when a property loss is due to two causes, one that is excluded
and one that is covered, the policy provides coverage.
| Conditional Receipt: A receipt given for
premium payments accompanying an application for insurance. If the
application is approved as applied for, the coverage is effective as of the
date of the prepayment or the date on which the last of the underwriting
requirements, such as a medical examination, has been fulfilled.
| Conditionally Renewable: Continuance
provision of a health insurance policy under which the company cannot cancel
the policy during its term but can refuse to renew under certain conditions
stated in the contract.
| Conditions: Provisions inserted in an insurance
contract that qualify or place limitations on the insurer's promise to
perform.
| Confining Sickness: An illness that
confines an insured person to his home or to a hospital.
| Conservation: The attempt by the insurer to
prevent the lapse of a policy.
| Consideration: One of the elements for a
binding contract. Consideration is acceptance by the insurance company of
the payment of the premium and the statement made by the prospective
policyholder in the application.
| Consideration Clause: The clause that
stipulates the basis on which the company issues the insurance contract. In
health policies, the consideration is usually the statements in the
application and the payment of premium.
| Consequential Loss: Financial loss
occurring as the consequence of some other loss. Often called an indirect
loss.
| Contents Broad Form: See
Homeowners 4 policy.
| Contingent Annuity Option: An
option under which an employee may elect to receive, under certain
conditions, a reduced amount of annuity with the same income, or a specified
fraction, to be paid after his death to another person designated as his
contingent annuitant, for that person's lifetime. The contingent annuitant
is usually the husband or the wife. (See Joint and Survivor Annuity)
| Contingent Beneficiary: The person or
persons designated to receive the benefits of a policy or plan if the
primary beneficiary dies while the insured is living.
| Contingent
Employers Liability Insurance: provides payment on behalf of the
employer for bodily injury to an employee if that person is ineligible to
receive workers compensation benefits, e.g., an "occasional"
employee.
| Contingent
Liability: Liability arising out of work done by independent contractors
for a firm. A firm may be liable for the work done by an independent
contractor if the activity is illegal, the situation does not permit
delegation of authority, or the work is inherently dangerous.
| Contingent Owner: The person to succeed as
owner of a life insurance policy if the original owner dies.
| Contract: A binding agreement between two or more
parties for the doing or not doing of certain things. A contract of
insurance is embodied in a written document called the policy.
| Contract law:
the portion of civil law that interprets written agreements between
parties and resolves disputes between them.
| Contract Holder: The group, entity or person
to whom a group annuity contract is issued.
| Contract
of adhesion: occurs when one party to the contract writes it and offers
other parties only the option of acceptance or rejection.
In such a circumstance the law interprets any ambiguities in the
contract against the party writing it.
| Contract Law
| Contractual Liability: Legal liability
of another party that the business firm agrees to assume by a written or
oral contract.
| Contribution by Equal Shares:
Type of other-insurance provision often found in liability insurance
contracts that requires each company to share equally in the loss until the
share of each insurer equals the lowest limit of liability under any policy
or until the full amount of loss is paid.
| Contributory: A group insurance plan issued to
an employer under which both the employer and employee contribute to the
cost of the plan. Seventy-five percent of the eligible employees must be
insured. (See Noncontributory.)
| Contractual risk transfer: a major method of loss financing through which
a legal agreement is used to transfer risk to another party
| Contributory Negligence: Negligence
of the damaged person that helped to cause the accident. Some states bar
recovery to the plaintiff if the plaintiff was contributorily negligent to
any extent. Others apply comparative negligence.
| Conversion Privilege: A privilege granted in an insurance policy to
convert to a different plan of insurance without providing evidence of
insurability. The privilege granted by a group policy is to convert to an
individual policy upon termination of group coverage.
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