Dictionary of Insurance Terms -A-

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• Absolute Liability: Liability for
  damages even though fault or negligence cannot be proven.


• Accident: An event or occurrence which is
  unforeseen and unintended.


• Accidental Bodily Injury: Injury
  to the body as the result of an accident.


• Accounting: The process of recording, summarizing,
  and allocating all items of income and expense of the company and analyzing,
  verifying, and reporting the results.


• Act of God: A flood, earthquake or other
  non preventable accident resulting from natural causes that occur without
  any human intervention.


• Activities of Daily Living:
  A list of activities, normally including mobility, dressing, bathing, toileting,
  transferring, and eating which are used to assess degree of impairment
  and determine eligibility for some types of insurance benefits.


• Actual Cash
  Value (ACV): 1) The cost of replacing or restoring property at
  prices prevailing at the time and place of the loss, less depreciation,
  however caused; 2) replacement cost minus depreciation.


• Actuarially Fair: The price for insurance
  which exactly represents the expected losses


• Actuary: A person professionally trained in
  the technical aspects of pensions, insurance and related fields. The actuary
  estimates how much money must be contributed to an insurance or pension
  fund in order to provide future


• Additional insured: A person, company
  or entity protected by an insurance policy in addition to the insured.


• Adjuster: A person who investigates and settles
  losses for an insurance carrier.


• Adjusting: The process of investigating
  and settling losses with or by an insurance carrier.


• Adjustment Bureau: Organization
  for adjusting insurance claims that is supported by insurers using the
  bureau’s services.


• Administrative
  Services Only (AS0) Plan: An arrangement under which an insurance carrier
  or an independent organization will, for a fee, handle the administration
  of claims, benefits and other administrative functions for a self-insured
  group.


• Advance Premium Mutual: Mutual
  insurance company owned by the policyowners that does not issue assessable
  policies but charges premiums expected to be sufficient to pay all claims
  and expenses.


• Adverse Selection: The tendency
  of persons who present a poorer-than-average risk to apply for, or continue,
  insurance to a greater extent than do persons with average or better-than-average
  expectations of loss.


• Age Limits: Stipulated minimum and maximum
  ages below and above which the company will not accept applications or
  may not renew policies.


• Agent: An insurance company representative licensed
  by the state who solicits, negotiates or effects contracts of insurance,
  and provides service to the policyholder for the insurer.


• Aggregate Deductible: Deductible
  in some property and health insurance contracts in which all covered losses
  during a year are added together and the insurer pays only when the aggregate
  deductible amount is exceeded.


• Aggregate Indemnity: The maximum
  dollar amount that may be collected for any disability or period of disability
  under the policy.


• Alien Insurer: An insurance company
  domiciled in another country.


• Allied Lines: A term for forms of property
  insurance allied with fire insurance, covering such perils as windstorm,
  hail, explosion, and riot.


• Allocated Benefits: Benefits for
  which the maximum amount payable for specific services is itemized in the
  contract.


• All-risks Policy: Coverage by an
  insurance contract that promises to cover all losses except those losses
  specifically excluded in the policy. See also: Risks of direct loss to
  property.


• Amendment: A formal document changing the
  provisions of an insurance policy signed jointly by the insurance company
  officer and the policy holder or his authorized representative.


• Amortization: Paying an interest-bearing
  liability by gradual reduction through a series of installments, as opposed
  to one lump-sum payment.


• Annual Statement: The annual report,
  as of December 31, of an insurer to a state insurance department, showing
  assets and liabilities, receipts and disbursements, and other financial
  data.


• Application: A signed statement of facts
  made by a person applying for life insurance and then used by the insurance
  company to decide whether or not to issue a policy. The application becomes
  part of the insurance contract when the policy is issued.


• Arbitration: Arbitration: A form of alternative
  dispute resolution where an unbiased person or panel renders an opinion
  as to responsibility for or extent of a loss.


• Arson: The willful and malicious burning of,
  or attempt to burn, any structure or other property, often with criminal
  or fraudulent intent.


• Assessment Association: An
  insurer that does not charge a fixed premium for insurance, but rather
  assesses its members periodically to pay its losses. Assessment insurers
  usually collect an advance premium which is estimated to cover losses and
  expenses, but reserve the right to make additional assessments whenever
  the premium collected is insufficient.


• Assessment Mutual: Mutual insurance
  company that has the right to assess policyowners for losses and expenses.


• Assets: All funds, property, goods, securities,
  rights of action, or resources of any kind owned by an insurance company.
  Statutory accounting, however, excludes non-admitted assets, such as deferred
  or overdue premiums, that would be considered assets under generally accepted
  accounting principles (GAAP).


• Assignment: The legal transfer of one person’s
  interest in an insurance policy to another person.


• Association Captive: Type of captive
  insurer owned by members of a sponsoring organization or group, such as
  a trade association.


• Association Group: A group formed
  from members of a trade or a professional association for group insurance
  under one master health insurance contract.


• Assumption of Risk Doctrine:
  Defense against a negligence claim that bars recovery for damages if a
  person understands and recognizes the danger inherent in a particular activity
  or occupation.


• Attractive Nuisance: Condition
  that can attract and injure children. Occupants of land on which such a
  condition exists are liable for injuries to children.


• Automatic Reinsurance: An agreement
  that the insurer must cede and the reinsurer must accept all risks within
  certain explicitly defined limits. The reinsurer undertakes in advance
  to grant reinsurance to the extent specified in the agreement in every
  case where the ceding company accepts the application and retains its own
  limit.


• Automobile Insurance Plan:
  One of several types of “shared market” mechanisms where persons who are
  unable to obtain such insurance in the voluntary market are assigned to
  a particular company, usually at a higher rate than the voluntary market.
  Formerly called “Assigned Risk.”


• Automobile Liability Insurance:
  Protection for the insured against financial loss because of legal liability
  for car-related injuries to others or damage to their property.


• Automobile Physical
  Damage Insurance: Coverage to pay for damage to or loss of an insured
  automobile resulting from collision, fire, theft, or other perils.


• Automobile Reinsurance
  Facility: One of several types of “shared market” mechanisms used to
  make automobile insurance available to persons who are unable to obtain
  such insurance in the regular market.


• Aviation Insurance: Aircraft insurance
  including coverage of aircraft or their contents, the owner’s liability,
  and accident insurance on the passengers.Beneficiary: The person designated
  or provided for by the policy terms to receive any benefits provided by
  the policy or plan upon the death of the insured.


• Average Indexed
  Monthly Earnings (AIME): Under the OASDI program, the person’s actual
  earnings are indexed to determine his or her primary insurance amount (PIA).


• Avoidance: see Loss Avoidance.