Dictionary of Insurance Terms -C-

-C-

• 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.


• 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.


• Casualty Insurance: Insurance concerned
  with the insider’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.


• Chartered Life


• 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.


• 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.


• 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 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


• 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.


• Conditions: Provisions inserted in an insurance
  contract that qualify or place limitations on the insurer’s promise to
  perform.


• 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 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.


• 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.)


• Contributory Negligence: Negligence
  of the damaged person that helped to cause the accident. Some states bar
  recovery to the plaintiff if the plaintiff was contributory negligent to
  any extent. Others apply comparative negligence.


• Convertible Bond: A bond that offers
  the holder the privilege of converting the bond into a specified number
  of shares of stock.


• 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


• Coverage: The scope of protection provided
  under a contract of insurance; any of several risks covered by a policy.


• Coverage for Damage to
  Your Auto: That part of the personal auto policy insuring payment for
  damage or theft of the insured automobile. This optional coverage can be
  used to insure both collision and other-than-collision losses.


• Covered: 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.


• CPCU: See Chartered Property and Casualty
  Underwriter.


• Credibility: A statistical measure of
  the degree to which past results make good forecasts of future results.


• Credibility Factor The weight given
  to an individual insured’s past experience in computing premiums for future
  coverage.


• Credit Insurance: A guarantee to
  manufacturers, wholesalers, and service organizations that they will be
  paid for goods shipped or services rendered. Applies to that part of working
  capital which is represented by accounts receivable.


• Crop-hail Insurance: Protection
  against damage to growing crops as a result of hail or certain other named
  perils.


• Cross Purchase Agreement:
  specifies the terms for the surviving partners or shareholders to buy a
  deceased’s share of the business’s ownership.


• CSR: Customer service representatives support
  the work of insurance agents with a variety of tasks that must be done
  within a company or agency to deliver services to and handle requests from
  clients.


• Currently Insured: Status of a covered
  person under the Old-age, survivors, and Disability Insurance (OASDI) program
  who has at least six quarters of coverage out of the last thirteen quarters,
  ending with the quarter of death, disability, or entitlement to retirement
  benefits.