Glossary
Insurance Terms Glossary
This page provides a glossary of insurance terms and definitions that are commonly used in the insurance business. New terms will be added to the glossary over time.
The definitions in this glossary are developed by the NAIC Research and Actuarial Department staff based on various insurance references. These definitions represent a common or general use of the term. Some words and/or phrases may be defined differently by other entities, or used in a context such that the definition shown may not be applicable.
Terms beginning with A
- Accelerated Benefits
- – a life insurance policy option to receive benefits prior to death.
- Accident
- – an unforeseen circumstance, resulting in physical injury or death, for which police coverage provides.
- Accident & Health
- – coverage providing payment – in addition to medical payments – for lost income as a result of an accident or illness.
- Accidental Death Benefit
- – benefit payable to a beneficiary or beneficiaries in the event of death of the insured that is the result of an accident.
- Account Value
- – the cumulative total premiums paid into the account plus all accumulated interest less a deduction for any administrative charges.
- Accounting Date
- – the annual reporting date for a company. Usually December 31st.
- Accredited Reinsurer
- – a reinsurer that files an annual statement with another state's domiciliary commissioner, submits to examination of its books by its domiciliary jurisdiction, and meets minimum surplus requirements.
- Accrued Interest
- – the amount of income earned from an investment between coupon payment dates or since the last coupon payment.
- Accrued Retrospective Premium
- – an estimated premium adjustment on a retrospectively rated policy, this liability represents additional monies owed to the reporting entity by policyholders.
- Accumulation
- – an excess of risks subject to the same loss occurrence
- Acquisition Costs
- – insurer costs for creating new or renewal insurance contracts, primarily agent and broker commissions, premium taxes, and underwriting and policy issuance expenses.
- Active Life Reserve
- – reserves computed for long term disability policies.
- Actual Cash Value
- – present cost of replacement less depreciation from use and obsolescence.
- Actuary
- – a technical specialist who rates the chances of loss, sets rates, and determines the amount of reserves needed for future claims.
- Additional Insured
- – entity(ies) added to a policy beyond the named insured via endorsement.
- Adequate Rate
- – a premium level sufficient to cover losses and expenses yet still generate a fair profit for the insurer.
- Adjuster
- – individual representing the insurer in negotiating the settlement of a claim on behalf of the insurer.
- Adjusting Bureau
- – organization, engaged by insurance companies, as an independent contractor for the adjustment of claims.
- Admitted Assets
- – assets of insurance companies which are recognized by state law as available to meet obligations to policyholders.
- Admitted Company
- – insurance company licensed to write business in the state.
- Advance Premium
- – premium payment made in advance of the due date.
- Adverse Selection
- – the propensity of lower risk individuals to be more likely to terminate their coverage.
- Age Limits
- – for certain underwriting purposes ages minimums and maximums for policy issuance set by insurers.
- Agent
- – the insurance representative that serves the insurance buyer either on behalf of the insurance company (captive agent) or independently (broker).
- Aggregate Indemnity
- – the maximum amount collected for a loss(es) under an insurance policy
- Aggregate Limit
- – the maximum amount of losses covered by a policy for a given period of time.
- Aggregate Stop Loss Insurance
- – coverage protecting a self-insured employer who funds employee health insurance against the risk that the entire plan's losses will exceed a specific dollar amount. Can also include a specific stop loss limit on individual claims.
- Agreed Amount Clause
- – a property insurance policy provision where an insurer agrees not to compare insurance limit with the value of the property and to waive benefits associated with a co-insurance clause.
- Aircraft – All Others
- – insurance covering all other aircraft not Private Passenger Aircraft including commercial, corporate, leased, hired, rental, agriculture, industrial, and commuter aircraft exposures.
- Aircraft – All Risks
- – insurance coverage for physical damage to an aircraft and any auxiliary equipment.
- Aircraft – Private Passenger
- – insurance coverage for an aircraft designed to carry four or fewer persons, used solely for non-commercial, pleasure and non-business purposes. Any aircraft designated for a greater number of occupants or aircraft without an FAA category is not eligible for Private Passenger Aircraft coverage.
- Alien Insurer
- – an insurance company domiciled outside the U.S.
- Allied Lines
- – coverage for those perils associated with property coverage in addition to fire and lightning (e.g., smoke, water damage, hail, riot).
- Allocated Loss Adjustment Expense (ALAE)
- – loss adjustment costs directly attributable to specific claims.
- Alternate Employer Endorsement
- – an endorsement to a workers compensation policy extending coverage to employees who work under the direction of another company (e.g. staffing agency employees, leased employees).
- A.M. Best Company
- – an agency that rates the financial strength of insurance companies.
- Amortization
- – the distribution of the cost of an intangible asset over its useful lifetime.
- Annual Statement
- – financial statements for specific business operations of an insurer reported annually to the domiciliary state insurance department.
- Annuitant
- – one covered by an annuity contract who receives payments from that contract for life under a series of payments.
- Annuity
- – contract for a series of payments due an individual (annuitant) for life or for a prescribed period of time.
- Apparent Authority
- – authority an agent is perceived to have because of circumstances made possible by the insurance company.
- Appraisal
- – a determination of the value of property or the amount of the loss.
- As of Date
- – the date as of which the balance sheet is prepared, also called the reporting date.
- Asset Valuation Reserve (AVR)
- – a reserve designed to protect surplus against any major fluctuations in the market value of assets and to provide a reserve for potential credit losses.
- Assets
- – Economic resources, both tangible and intangible assets, economic benefits obtained or controlled by a particular entity as a result of past transactions.
- Assigned Risk Plan
- – mandated plan for coverage of high-risk applicants applicable to personal automobile coverage for drivers who are unable to obtain coverage through normal markets.
- Association
- – captive companies that benefit an industry, trade, or similar group; sponsored by associations.
- Assumed Reinsurance
- – an amount of insurance risk that has been accepted by a reinsurer from one or more other insurers (or reinsurers) via a reinsurance contract (treaty).
- ATP – Annuity Transition Policy
- – an individual annuity that was previously in an ERISA qualified plan that did not have to be registered as an individual annuity when it was part of the qualified plan. These were reported with group annuity business, but at distribution in the form of an individual annuity, they become individual annuity business.
- Authorized Reinsurance
- – reinsurance placed with a reinsurer that is licensed or otherwise recognized by a particular state.
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