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BWE Glossary of Insurance Terms
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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.
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 cancelled during the policy term by the insurer or insured.
Cancellation
The discontinuance of an insurance policy before its normal expiration date, either by the company or the insured.
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.
Capitation
In managed-care plans, a system of prepaying doctors and hospitals a set of fee to provide health care for each enrollee, without regard to the type or number of services rendered.
Cargo Insurance
Type of ocean marine insurance that protects the shipper of the goods against financial loss if the goods are damaged or lost.
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, earthquake.
Causes-of-loss Form
Form added to commercial property insurance policy that indicates the causes of loss that are covered. This term replaces the old term Perils.
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.
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.
Claim
A request for payment of a loss which may come under the terms of an insurance contract.
Claims Adjuster
Person who settles claims: an agent, company adjuster, independent adjuster, adjustment bureau, or public adjuster.
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 insured's are placed in the same underwriting class and each is charged the same rate.
Coinsurance
1) A provision under which an insured who carries less than the stipulated coverage 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., 20 percent by the insured and 80 percent by the insurer.
Collision Insurance
Protection against loss resulting from any damage to the insured 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
A measure of the relationship between dollars spent for payment of 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 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 coverage's 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.
Common Stock
Securities that represent an ownership interest in a corporation.
Company Adjuster
Claims adjuster 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 coverage's. 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 coverage's. This is called compulsory insurance.
Compulsory Insurance
Any form of insurance which is required by law.
Concealment
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.
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.
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 a hospital or an insured's persons home.
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.
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 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.
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.
Contractual Liability
Legal liability of another party that the business firm agrees to assume by a written or oral contract.
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.
Convertible Term Insurance
Term insurance which can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance.
Coordination of Benefits (COB)
The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.
Copayment
A fee to patients-usually $5 to $15-for doctors visits or medical services.
Cost Basis
An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift.
Cost-of-Living Rider
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
Coverage
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
Covered Expenses
Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him/her to a payment of benefits under a health insurance policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense which will be considered in the calculation of benefits.
Covered Participant
A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.
Credit Health Insurance
A form of health insurance on a borrower, usually under an installment purchase agreement. The benefits cover the obligations of the borrower and are payable to the creditor.
Crop-hail Insurance
Protection against damage to growing crops as a result of hail or certain other named perils.
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