Insurance Glossary Insurance terms and definitions Coverages and benefits listed below may not be available in your state. If available, some optional coverages and benefits might be offered at an additional charge. Contact The Gena Trust Agency today to learn more. A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | R | S | T | U | V | W P PACKAGE POLICY A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance. PAID-UP ADDITIONAL INSURANCE OPTION An option, available to the owners of participating life insurance policies, that allows the policy owner to use policy dividends to purchase additional insurance on the insured’s life; the paid-up additional insurance is issued on the same plan as the basic policy and in whatever face amount the dividend can provide at the insured’s attained age. (See Dividend, Participating policy, Policy dividend options ) PAID-UP POLICY An insurance policy that requires no further premium payments but continues to provide coverage. PARTIAL DISABILITY See Residual disability PARTICIPATING POLICY A type of insurance policy that allows policy owners to receive policy dividends. Also known as par policy. (See Dividend ) PAY-AT-THE-PUMP A system proposed in the 1990’s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline. PAYOUT OPTIONS The methods available to an annuity contract owner for the distribution of the annuity’s accumulated value. (1) The lump sum distribution method allows the contract owner to receive the balance of his account in a single payment. (2) The fixed period option provides that the annuity’s accumulated value will be paid out over a specified period of time. (3) The fixedamount option provides that the annuity’s accumulated value will be paid out in a pre-selected payment amount until the accumulated value is exhausted. (4) A life annuity option provides that periodic income payments will be tied in some manner to the life expectancy of a named individual. (See Life annuity ) PENSION BENEFIT GUARANTY CORPORATION An independent federal government agency that administers the Pension Plan Termination Insurance program to ensure that vested benefits of employees whose pension plans are being terminated are paid when they come due. Only defined benefit plans are covered. Benefits are paid up to certain limits. PENSIONS Programs to provide employees with retirement income after they meet minimum age and service requirements. Life insurers hold some of these funds. Since the 1970s responsibility for funding retirement has increasingly shifted from employers (defined benefit plans that promise workers a specific retirement income) to employees (defined contribution plans financed by employees that may or may not be matched by employer contributions). (See Defined benefit plan, Defined contribution plan ) PER CAPITA BENEFICIARY DESIGNATION A type of life insurance policy beneficiary designation in which the life insurance benefits are divided equally among the designated beneficiaries who survive the insured. For example, if the policy specifies two beneficiaries, but only one is surviving at the time of the insured’s death, then the remaining beneficiary receives the entire policy benefit. Contrast with per stirpes beneficiary designation. PER STIRPES BENEFICIARY DESIGNATION A type of life insurance policy beneficiary designation in which the life insurance benefits are divided among a class of beneficiaries; for example, children of the insured. The living members of the class and the descendants of any deceased members of the class share in the benefits equally. Contrast with per capita beneficiary designation. PERIL A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded. PERIOD CERTAIN The stated period over which an insurer makes periodic benefit payments under an annuity certain. (See Annuity certain) PERSONAL ARTICLES FLOATER A policy or an addition to a policy used to cover personal valuables, like jewelry or furs. PERSONAL INJURY PROTECTION COVERAGE / PIP Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car. PERSONAL LINES Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies. (See Commercial lines) POINT-OF-SERVICE PLAN Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed. POLICY A written contract for insurance between an insurance company and policyholder stating details of coverage. POLICY DIVIDEND OPTIONS Ways in which the owner of a participating insurance policy may receive policy dividends. (See Additional term insurance option,Cash dividend option, Dividend accumulations option, Paid-up additional insurance option, Premium reduction option) POLICYHOLDERS’ SURPLUS The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation. POLITICAL RISK INSURANCE Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property. POLLUTION INSURANCE Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires. (See Claims-made policy) POOL See Insurance pool PRE-EXISTING CONDITION (1) According to most group health insurance policies, a condition for which an individual received medical care during the three months immediately prior to the effective date of her coverage. (2) According to most individual health insurance policies, an injury that occurred or a sickness that first appeared or manifested itself within a specified period—usually two years—before the policy was issued and that was not disclosed on the application for insurance. PREFERRED PROVIDER ORGANIZATION Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule. PREFERRED RISK CLASS In insurance underwriting, the group of proposed insureds who represent a significantly lower than average likelihood of loss within the context of the insurer’s underwriting practices. Contrast with declined risk class, standard risk class and substandard risk class. PREMISES The particular location of the property or a portion of it as designated in an insurance policy. PREMIUM The price of an insurance policy, typically charged annually or semiannually. (See Direct premiums, Earned premium, Unearned premium) PREMIUM REDUCTION OPTION An option, available to the owners of participating insurance policies, that allows the insurer to apply policy dividends toward the payment of renewal premiums. (See Dividend, Policy dividend options ) PREMIUM TAX A state tax on premiums paid by its residents and businesses and collected by insurers. PREMIUMS IN FORCE The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time. PREMIUMS WRITTEN The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions. PRIMARY BENEFICIARY The party designated to receive the proceeds of a life insurance policy following the death of the insured. Also known as first beneficiary. (See Contingent beneficiary ) PRIMARY COMPANY In a reinsurance transaction, the insurance company that is reinsured. PRIMARY MARKET Market for new issue securities where the proceeds go directly to the issuer. PRIME RATE Interest rate that banks charge to their most creditworthy customers. Banks set this rate according to their cost of funds and market forces. PRIOR APPROVAL STATES States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect. PRIVATE MORTGAGE INSURANCE See Mortgage guarantee insurance PRIVATE PLACEMENT Securities that are not registered with the Securities and Exchange Commission and are sold directly to investors. PRODUCT LIABILITY A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault. PRODUCT LIABILITY INSURANCE Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product. PROFESSIONAL LIABILITY INSURANCE Covers professionals for negligence and errors or omissions that injure their clients. PROOF OF LOSS Documents showing the insurance company that a loss occurred. PROPERTY/CASUALTY INSURANCE Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as non-life or general insurance. PROPERTY/CASUALTY INSURANCE CYCLE Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent. PROPOSITION 103 A November 1988 California ballot initiative that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location. The initiative changed many aspects of the state’s insurance system and was the subject of lawsuits for more than a decade. PURCHASING GROUP An entity that offers insurance to groups of similar businesses with similar exposures to risk. PURE ENDOWMENT A life insurance contract that pays a periodic income benefit for the life of the owner of the annuity. The payment can be monthly, quarterly, semiannually or annually. PURE LIFE ANNUITY A form of annuity that ends payments when the annuitant dies. Payments may be fixed or variable. Glossary content provided by Insurance Information Institute.
