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| L-SHARE
VARIABLE ANNUITIES |
A form of
variable annuity contract usually with short surrender periods and
higher mortality and expense risk charges.
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LADDERING |
A technique
that consists of staggering the maturity dates and the mix of different
types of bonds.
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| LAW OF
LARGE NUMBERS |
The theory
of probability on which the business of insurance is based. Simply put,
this mathematical premise says that the larger the group of units
insured, such as sport-utility vehicles, the more accurate the
predictions of loss will be.
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LIABILITY INSURANCE |
Insurance
for what the policyholder is legally obligated to pay because of bodily
injury or property damage caused to another person.
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| LIFE
INSURANCE |
See
Ordinary life insurance;
Term insurance;
Variable life insurance;
Whole life insurance
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| LIMITS |
Maximum
amount of insurance that can be paid for a covered loss.
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| LINE |
Type or
kind of insurance, such as personal lines.
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LIQUIDATION |
Enables the
state insurance department as liquidator or its appointed deputy to wind
up the insurance company’s affairs by selling its assets and settling
claims upon those assets. After receiving the liquidation order, the
liquidator notifies insurance departments in other states and state
guaranty funds of the liquidation proceedings. Such insurance company
liquidations are not subject to the Federal Bankruptcy Code but to each
state’s liquidation statutes.
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LIQUIDITY |
The ability
and speed with which a security can be converted into cash.
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| LIQUOR
LIABILITY |
Coverage
for bodily injury or property damage caused by an intoxicated person who
was served liquor by the policyholder.
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| LLOYD'S
OF LONDON |
A
marketplace where underwriting syndicates, or mini-insurers, gather to
sell insurance policies and reinsurance. Each syndicate is managed by an
underwriter who decides whether or not to accept the risk. The Lloyd’s
market is a major player in the international reinsurance market as well
as a primary market for marine insurance and large risks. Originally,
Lloyd’s was a London coffee house in the 1600s patronized by shipowners
who insured each other’s hulls and cargoes. As Lloyd’s developed,
wealthy individuals, called “Names,” placed their personal assets behind
insurance risks as a business venture. Increasingly since the 1990s,
most of the capital comes from corporations.
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| LLOYDS |
Corporation
formed to market services of a group of underwriters. Does not issue
insurance policies or provide insurance protection. Insurance is written
by individual underwriters, with each assuming a part of every risk. Has
no connection to Lloyd’s of London, and is found primarily in Texas.
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LONG-TERM CARE INSURANCE |
Coverage
that, under specified conditions, provides skilled nursing, intermediate
care, or custodial care for a patient (generally over age 65) in a
nursing facility or his or her residence.
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| LOSS |
A reduction
in the quality or value of a property, or a legal liability.
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| LOSS
ADJUSTMENT EXPENSES |
The sum
insurers pay for investigating and settling insurance claims, including
the cost of defending a lawsuit in court.
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| LOSS
COSTS |
The portion
of an insurance rate used to cover claims and the costs of adjusting
claims. Insurance companies typically determine their rates by
estimating their future loss costs and adding a provision for expenses,
profit, and contingencies.
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| LOSS OF
USE |
A provision
in homeowners and renters insurance policies that reimburses
policyholders for any extra living expenses due to having to live
elsewhere while their home is being restored following a disaster.
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| LOSS
RATIO |
Percentage
of each premium dollar an insurer spends on claims.
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| LOSS
RESERVES |
| The
company’s best estimate of what it will pay for claims, which is
periodically readjusted. They represent a liability on the insurer’s
balance sheet |
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MALPRACTICE INSURANCE |
Professional liability coverage for physicians, lawyers, and other
specialists against suits alleging negligence or errors and omissions
that have harmed clients.
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| MANAGED
CARE |
Arrangement
between an employer or insurer and selected providers to provide
comprehensive health care at a discount to members of the insured group
and coordinate the financing and delivery of health care. Managed care
uses medical protocols and procedures agreed on by the medical
profession to be cost effective, also known as medical practice
guidelines.
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| MANUAL |
A book
published by an insurance or bonding company or a rating association or
bureau that gives rates, classifications, and underwriting rules.
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| MARINE
INSURANCE |
Coverage
for goods in transit, and for the commercial vehicles that transport
them, on water and over land. The term may apply to inland marine but
more generally applies to ocean marine insurance. Covers damage or
destruction of a ship’s hull and cargo and perils include collision,
sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo
to save other property. Wear and tear, dampness, mold, and war are not
included. (See Inland marine and Ocean marine)
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MCCARRAN-FERGUSON ACT |
Federal law
signed in 1945 in which Congress declared that states would continue to
regulate the insurance business. Grants insurers a limited exemption
from federal antitrust legislation.
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MEDIATION |
Nonbinding
procedure in which a third party attempts to resolve a conflict between
two other parties.
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| MEDICAID |
A
federal/state public assistance program created in 1965 and administered
by the states for people whose income and resources are insufficient to
pay for health care.
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| MEDICAL
MALPRACTICE INSURANCE |
See
Malpractice insurance
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| MEDICAL
PAYMENTS INSURANCE |
A coverage
in which the insurer agrees to reimburse the insured and others up to a
certain limit for medical or funeral expenses as a result of bodily
injury or death by accident. Payments are without regard to fault.
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| MEDICAL
UTILIZATION REVIEW |
The
practice used by insurance companies to review claims for medical
treatment.
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| MEDICARE |
Federal
program for people 65 or older that pays part of the costs associated
with hospitalization, surgery, doctors’ bills, home health care, and
skilled-nursing care.
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MEDIGAP/MEDSUP |
Policies
that supplement federal insurance benefits particularly for those
covered under Medicare.
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| MINE
SUBSIDENCE COVERAGE |
An
endorsement to a homeowners insurance policy, available in some states,
for losses to a home caused by the land under a house sinking into a
mine shaft. Excluded from standard homeowners policies, as are other
forms of earth movement.
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| MONEY
SUPPLY |
Total
supply of money in the economy, composed of currency in circulation and
deposits in savings and checking accounts. By changing the interest
rates the Federal Reserve seeks to adjust the money supply to maintain a
strong economy.
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MORTALITY AND EXPENSE (M&E) RISK CHARGE |
A fee that
covers such annuity contract guarantees as death benefits.
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| MORTGAGE
GUARANTEE INSURANCE |
Coverage
for the mortgagee (usually a financial institution) in the event that a
mortgage holder defaults on a loan. Also called private mortgage
insurance (PMI).
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| MORTGAGE
INSURANCE |
A form of
decreasing term insurance that covers the life of a person taking out a
mortgage. Death benefits provide for payment of the outstanding balance
of the loan. Coverage is in decreasing term insurance, so the amount of
coverage decreases as the debt decreases. A variant, mortgage
unemployment insurance pays the mortgage of a policyholder who becomes
involuntarily unemployed. (See
Term insurance)
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MORTGAGE-BACKED SECURITIES |
Investment
grade securities backed by a pool of mortgages. The issuer uses the cash
flow from mortgages to meet interest payments on the bonds.
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| MULTIPLE
PERIL POLICY |
A package
policy, such as a homeowners or business insurance policy, that provides
coverage against several different perils. It also refers to the
combination of property and liability coverage in one policy. In the
early days of insurance, coverages for property damage and liability
were purchased separately.
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MUNICIPAL BOND INSURANCE |
Coverage
that guarantees bondholders timely payment of interest and principal
even if the issuer of the bonds defaults. Offered by insurance companies
with high credit ratings, the coverage raises the credit rating of a
municipality offering the bond to that of the insurance company. It
allows a municipality to raise money at lower interest rates. A form of
financial guarantee insurance. (See
Financial guarantee insurance)
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MUNICIPAL LIABILITY INSURANCE |
Liability
insurance for municipalities.
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| MUTUAL
HOLDING COMPANY |
An
organizational structure that provides mutual companies with the
organizational and capital raising advantages of stock insurers, while
retaining the policyholder ownership of the mutual.
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| MUTUAL
INSURANCE COMPANY |
| A company
owned by its policyholders that returns part of its profits to the
policyholders as dividends. The insurer uses the rest as a surplus
cushion in case of large and unexpected losses |
| NAMED
PERIL |
Peril
specifically mentioned as covered in an insurance policy.
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| NATIONAL
FLOOD INSURANCE PROGRAM |
Federal
government-sponsored program under which flood insurance is sold to
homeowners and businesses. (See
Adverse selection;
Flood insurance)
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| NET
PREMIUMS WRITTEN |
See
Premiums written
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| NO-FAULT |
Auto
insurance coverage that pays for each driver’s own injuries, regardless
of who caused the accident. No-fault varies from state to state. It also
refers to an auto liability insurance system that restricts lawsuits to
serious cases. Such policies are designed to promote faster
reimbursement and to reduce litigation.
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| NO-FAULT
MEDICAL |
A type of
accident coverage in homeowners policies.
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| NO-PAY,
NO-PLAY |
The idea
that people who don’t buy coverage should not receive benefits.
Prohibits uninsured drivers from collecting damages from insured
drivers. In most states with this law, uninsured drivers may not sue for
noneconomic damages such as pain and suffering. In other states,
uninsured drivers are required to pay the equivalent of a large
deductible ($10,000) before they can sue for property damages and
another large deductible before they can sue for bodily harm.
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NON-ADMITTED ASSETS |
Assets that
are not included on the balance sheet of an insurance company, including
furniture, fixtures, past-due accounts receivable, and agents’ debt
balances. (See
Assets)
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NON-ADMITTED INSURER |
Insurers
licensed in some states, but not others. States where an insurer is not
licensed call that insurer non-admitted. They sell coverage that is
unavailable from licensed insurers within the state.
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| NOTICE
OF LOSS |
A written
notice required by insurance companies immediately after an accident or
other loss. Part of the standard provisions defining a policyholder's
responsibilities after a loss.
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| NUCLEAR
INSURANCE |
Covers
operators of nuclear reactors and other facilities for liability and
property damage in the case of a nuclear accident and involves both
private insurers and the federal government.
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| NURSING
HOME INSURANCE |
| A form of
long-term care policy that covers a policyholder’s stay in a nursing
facility |
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OCCUPATIONAL DISEASE |
Abnormal
condition or illness caused by factors associated with the workplace.
Like occupational injuries, this is covered by workers compensation
policies. (See
Workers compensation)
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OCCURRENCE POLICY |
Insurance
that pays claims arising out of incidents that occur during the policy
term, even if they are filed many years later. (See
Claims-made policy)
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| OCEAN
MARINE INSURANCE |
Coverage of
all types of vessels and watercraft, for property damage to the vessel
and cargo, including such risks as piracy and the jettisoning of cargo
to save the property of others. Coverage for marine-related liabilities.
War is excluded from basic policies, but can be bought back.
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| OPEN
COMPETITION STATES |
States
where insurance companies can set new rates without prior approval,
although the state’s commissioner can disallow them if they are not
reasonable and adequate or are discriminatory.
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OPERATING EXPENSES |
The cost of
maintaining a business’s property, includes insurance, property taxes,
utilities and rent, but excludes income tax, depreciation and other
financing expenses.
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| OPTIONS |
Contracts
that allow, but do not oblige, the buying or selling of property or
assets at a certain date at a set price.
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ORDINANCE OR LAW COVERAGE |
Endorsement
to a property policy, including homeowners, that pays for the extra
expense of rebuilding to comply with ordinances or laws, often building
codes, that did not exist when the building was originally built. For
example, a building severely damaged in a hurricane may have to be
elevated above the flood line when it is rebuilt. This endorsement would
cover part of the additional cost.
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| ORDINARY
LIFE INSURANCE |
A life
insurance policy that remains in force for the policyholder’s lifetime.
It contrasts with term insurance, which only lasts for a specified
number of years but is renewable. (See
Term insurance)
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| ORIGINAL
EQUIPMENT MANUFACTURER PARTS / OEM |
Sheet metal
auto parts made by the manufacturer of the vehicle. (See
Generic auto parts)
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OVER-THE-COUNTER (OTC) |
| Security
that is not listed or traded on an exchange such as the New York Stock
Exchange. Business in over-the-counter securities is conducted through
dealers using electronic networks. |
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