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| INSURANCE DEFINITIONS - C
Cafeteria Plan: Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs. Also called flexible benefit plans.
Calendar-year Deductible: Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.
Cancelable: A contract of health insurance that may be canceled during the policy term by the insurer or insured.
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.
Capitation: A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served regardless of the actual number of services provided to each person.
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.
Career average formula: A pension plan formula that bases retirement benefits on earnings during all years of service to the employer.
Cash Surrender Value: The amount available in cash upon voluntary termination of a policy by its owner before it becomes payable by death or maturity.
Casualty Insurance: Insurance concerned with the insured'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.
Change of Occupation Clause: Provision in a health insurance policy stipulating that if the insured changes to a more hazardous occupation, the benefits
are reduced based on the amount of benefits the premium would have purchased for the more hazardous occupation.
Chartered Financial Consultant (ChFC): An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and life and health insurance and has passed ten professional examinations administered by The American College.
Chartered Life Underwriter (CLU): An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.
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. CLU: See Chartered Life Underwriter.
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 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 Major Medical Insurance: A policy designed to give the protection offered by both a basic and a major medical health insurance policy. It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits.
Comprehensive Medical Expense Insurance: A form of health insurance which provides, in one policy, protection for both basic hospital expense and major medical expense coverages. The major medical part of a comprehensive policy is characterized by a deductible amount, coinsurance, and high maximum benefits.
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.
Conditionally Renewable: Continuance provision of a health insurance policy under which the company cannot cancel the policy during its term but can refuse to renew under certain conditions stated in the contract.
Conditions: Provisions inserted in an insurance contract that qualify or place limitations on the insurer's promise to perform.
Confining Sickness: An illness that confines an insured person to his home or to a hospital.
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 Annuity Option: An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person's lifetime. The contingent annuitant is usually the husband or the wife. (See Joint and Survivor Annuity)
Contingent Beneficiary: The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the insured is living.
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.
Contingent Owner: The person to succeed as owner of a life insurance policy if the original owner dies.
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.
Contract Holder: The group, entity or person to whom a group annuity contract is issued.
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 contributorily negligent to any extent. Others apply comparative negligence.
Conversion Privilege: A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability. The privilege granted by a group policy is to convert to an individual policy upon termination of group coverage.
Conversion Privilege: The right given to an insured person to change insurance without evidence of medical insurability, usually to an individual policy upon termination of coverage under a group contract.
Convertible Bond: A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.
Convertible Term Insurance: Term insurance which can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance. Credit life insurance. Term life insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.
Coordination of Benefits (COB): The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.
Corridor Deductible: Major medical plan deductible that excludes benefits provided by a basic plan if both a basic and a supplemental group major medical expense policy are in force.
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
Cost Containment: The controller reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs.
Cost-of-Living Rider: Benefit that can be added to a life insurance policy under which the policyowner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
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.
Covered Expenses: Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him/her to a payment of benefits under a health insurance policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense which will be considered in the calculation of benefits.
Covered Participant: 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 Health Insurance: A form of health insurance on a borrower, usually under an installment purchase agreement. The benefits cover the obligations of the borrower and are payable to the creditor.
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.
Current Assumption Whole Life Insurance: Nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.
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.
PLEASE NOTE!... Definitions shown were gathered from a variety of sources. Mitchell Insurance Agency makes no representations for the accuracy of this information.
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