Vocabulary

Question 1

Commissioner

Answer 1

Insurance commissioner of the department of insurance

Question 2

NAIC

Answer 2

National Association of Insurance Commissioners

Question 3

circumstance including possibility of loss or no loss but no possibility of gain

Answer 3

Pure Risk

Question 4

Actual Cash Value

Answer 4

repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation

Question 5

Actuary

Answer 5

business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.

Question 6

an insurance company licensed to do business in a state(s), domiciled in an alternative state or country.

Answer 6

Admitted Company

Question 7

Agent

Answer 7

an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Question 8

Aggregate Cost Payments

Answer 8

method of reimbursement of a health plan with a corporate entity that directly provides care, where (1) the health plan is contractually required to pay the total operating costs of the corporate entity, less any income to the entity from other users of services, and (2) there are mutual unlimited guarantees of solvency between the entity and the health plan that put their respective capital and surplus at risk in guaranteeing each other.

Question 9

an insurance company formed according to the laws of a foreign country. The company must conform to state regulatory standards to legally sell insurance products in that state.

Answer 9

Alien Company

Question 10

All-Risk

Answer 10

also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

Question 11

Annuitant

Answer 11

the beneficiary of an annuity payment, or person during whose life and annuity is payable.

Question 12

a contract providing income for a specified period of time, or duration of life for a person or persons.

Answer 12

Annuity

Question 13

an estimate of value.

Answer 13

Appraisal

Question 14

Arbitration

Answer 14

a binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes

Question 15

Assumed Reinsurance

Answer 15

the assumption of risk from another insurance entity within a reinsurance agreement or treaty.

Question 16

an insurer licensed or admitted to do business in a particular state.

Answer 16

Authorized Company

Question 17

an individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.

Answer 17

Beneficiary

Question 18

Bonds

Answer 18

a form of debt security whereby the debt holder has a creditor stake in the company. Obligations issued by business units, governmental units and certain nonprofit units having a fixed schedule for one or more future payments of money; includes commercial paper, negotiable certificates of deposit, repurchase agreements and equipment trust certificates.

Question 19

Builders’ Risk Policies

Answer 19

typically written on a reporting or completed value form, this coverage insures against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and to materials incidental to construction.

Question 20

Burglary and Theft

Answer 20

coverage for property taken or destroyed by breaking and entering the insured’s premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

Question 21

business insurance typically for property, liability and business interruption coverage.

Answer 21

Business owners Policy

Question 22

Business Interruption

Answer 22

loss of income as a result of property damage to a business facility.

Question 23

Capital Gains (Loss)

Answer 23

excess (deficiency) of the sales price of an asset over its book value. Calculated on the basis of original cost adjusted, as appropriate, for accrual of discount or amortization of premium and for depreciation.

Question 24

Cash Equivalent

Answer 24

short-term, highly liquid investments that are both (a) readily convertible to known amounts of cash, and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Investments with original maturities of three months or less qualify under this definition.

Question 25

Casualty Insurance

Answer 25

a form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.

Question 26

an insurance company that transfers risk by purchasing reinsurance.

Answer 26

Ceding Company

Question 27

Claim

Answer 27

a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Question 28

Claims Adjustment Expenses

Answer 28

costs expected to be incurred in connection with the adjustment and recording of accident and health, auto medical and workers' compensation claims.

Question 29

A clause contained in most property insurance policies to encourage policy holders to carry a reasonable amount of insurance. If the insured fails to maintain the amount specified in the clause (Usually at least 80%), the insured shares a higher proportion of the loss. In medical insurance a percentage of each claim that the insured will bear.

Answer 29

Coinsurance

Question 30

Commercial Farm and Ranch

Answer 30

a commercial package policy for farming and ranching risks that includes both property and liability coverage. Coverage includes barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Question 31

Commercial Package Policy

Answer 31

provides a broad package of property and liability coverages for commercial ventures other than those provided insurance through a business owners policy.

Question 32

Comprehensive Personal Liability

Answer 32

comprehensive liability coverage for exposures arising out of the residence premises and activities of individuals and family members. (Non-business liability exposure protection for individuals.)

Question 33

Condos

Answer 33

homeowners insurance sold to condominium owners occupying the described property.

Question 34

Crop

Answer 34

coverage protecting the insured against loss or damage to crops from a variety of perils, including but not limited to fire, lightening, loss of revenue, tornado, windstorm, hail, flood, rain, or damage by insects.

Question 35

Deductible

Answer 35

Portion of the insured loss (in dollars) paid by the policy holder

Question 36

Direct Loss

Answer 36

Damage to covered real or personal property caused by a covered peril.

Question 37

an insurance company that is domiciled and licensed in the state in which it sells insurance.

Answer 37

Domestic Insurer

Question 38

Dwelling Property/Personal Liability

Answer 38

a special form of package policy composed of dwelling fire and/or allied lines, and personal liability insurance.

Question 39

Earned Premium

Answer 39

portion of insured's prepaid premium allocated to the insurance company's loss experience, expenses, and profit year- to -date.

Question 40

property coverages for losses resulting from a sudden trembling or shaking of the earth, including that caused by volcanic eruption. Excluded are losses resulting from fire, explosion, flood or tidal wave following the covered event.

Answer 40

Earthquake

Question 41

an amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

Answer 41

Endorsement

Question 42

Exposure

Answer 42

risk of possible loss.

Question 43

FAIR Plan - Fair Access to Insurance Requirements

Answer 43

state pools designed to provide insurance to property owners who are unable to obtain property insurance through conventional means.

Question 44

Farmowners Insurance

Answer 44

farmowners insurance sold for personal, family or household purposes. This package policy is similar to a homeowners policy, in that it has been developed for farms and ranches and includes both property and liability coverage for personal and business losses. Coverage includes farm dwellings and their contents, barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Question 45

Federal Flood Insurance

Answer 45

coverage for qualifying residents and businesses in flood prone regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968.

Question 46

FEMA - Federal Emergency Management Agency

Answer 46

an independent agency, tasked with responding to, planning for, mitigating and recovery efforts of natural disasters.

Question 47

Fire Coverage

Answer 47

coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rents, etc.

Question 48

Flood

Answer 48

coverage protecting the insured against loss or damage to real or personal property from flood. (Note: If coverage for flood is offered as an additional peril on a property insurance policy, file it under the applicable property insurance filing code.)

Question 49

Hazard

Answer 49

circumstance which tends to increase the probability or severity of a loss.

Question 50

Health Insurance

Answer 50

a generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or illness including related medical expenses.

Question 51

Homeowners Insurance

Answer 51

a package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical. Includes mobile homes at a fixed location.

Question 52

Independent Adjuster

Answer 52

freelance contractor paid a fee for adjusting losses on behalf of companies.

Question 53

Inland Marine Coverage

Answer 53

coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as live animals, property with antique or collector's value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.

Question 54

Insurance

Answer 54

an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Question 55

Liability

Answer 55

a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.

Question 56

Loss

Answer 56

physical damage to property or bodily injury, Including loss of use or loss of income

Question 57

Loss Ratio

Answer 57

the percentage of incurred losses to earned premiums.

Question 58

Mobile Homes - Homeowners

Answer 58

homeowners insurance sold to owners occupying the described mobile home.

Question 59

Moral Hazard

Answer 59

personality characteristics that increase probability of losses. For example not taking proper care to protect insured property because the insured knows the insurance company will replace it if it is damaged or stolen.

Question 60

Morale Hazard

Answer 60

negligence or disregard on the part of the insured which could lead to probable loss.

Question 61

Multi-Peril Insurance

Answer 61

personal and business property coverage combining several types of property insurance in one policy.

Question 62

Named Peril Coverage

Answer 62

insurance for losses explicitly defined in the policy contract.

Question 63

National Association of Insurance Commissioners (NAIC)

Answer 63

the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

Question 64

Ocean Marine Coverage

Answer 64

coverage for ocean and inland water transportation exposures; goods or cargoes; ships or hulls; earnings; and liability.

Question 65

Peril

Answer 65

the cause of property damage or personal injury, origin of desire for insurance. "Cause of Loss"

Question 66

Personal Injury Liability

Answer 66

liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated.

Question 67

Personal Property

Answer 67

single interest or dual interest credit insurance (where collateral is not a motor vehicle, mobile home, or real estate) that covers perils to goods purchased or used as collateral and that concerns a creditor's interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.

Question 68

Property

Answer 68

coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

Question 69

Pure Risk

Answer 69

circumstance including possibility of loss or no loss but no possibility of gain.

Question 70

Reinsurance

Answer 70

a transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis.

Question 71

Replacement Cost

Answer 71

the cost of replacing property without a reduction for depreciation due to normal wear and tear.

Question 72

Risk

Answer 72

Uncertainty concerning the possibility of loss by a peril for which insurance is pursued.

Question 73

Subrogation

Answer 73

situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Question 74

Surety Bond

Answer 74

a three-party agreement whereby a guarantor (insurer) assumes an obligation or responsibility to pay a second party (obligee) should the principal debtor (obligor) become in default.

Question 75

Workers' Compensation

Answer 75

insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.