capital sum The amount
paid to an insured under an accident or disability policy if the insured suffers
the loss of limb, sight or hearing.
capitation A rate paid,
usually monthly, to a health care provider. In return, the provider agrees
to deliver the health services agreed upon to any covered person.
cash surrender value
The amount, if any, available to the policy owner when certain life policies
are surrendered.
casualty insurance
This is a broad term which includes nearly every form of insurance except
life, fire and its allied lines and marine and inland marine.
catastrophe An event or
occurrence that causes a loss of extraordinarily large values.
causes of loss A substitute
term in the Commercial Property forms that replaces the old term "perils."
certificate of insurance
A memorandum stating that a policy has been issued. The certificate states
the coverage afforded in general terms. A mortgagee usually insists upon holding
the fire insurance policy on the mortgaged property, so a certificate of insurance
is sent to the mortgagor.
chartered property casualty underwriter
(CPCU) A designation awarded to qualified persons who successfully pass a
series of examinations involving, in addition to insurance knowledge, the
broad range of related business subjects such as accounting, economics, law,
management and finance. Offered by the American Institute for Chartered Property
and Casualty Underwriters.
claim A demand or notice of a
right or alleged right of any party to recover from an insurance company due
to a loss covered by the policy.
claimant The person making
a demand for payout of benefits.
claims adjuster
(or claims representative) The person responsible for investigating and settling
claims covered by insurance.
claims made Policies on a "claims made" basis cover
claims reported during the policy terms, regardless of the date of occurrence.
In contrast, "occurrence" policies cover claims which occur during the policy
term, regardless of when reported.
class rating A
rate-making method in which similar insureds are placed in the same underwriting
class and each is charged the same rate. clause Any specific part or provision
of a policy or endorsement.
coding The process of inputting
numerical and/or alphabetic data to represent policy information.
coinsurance clause
A clause which requires the policyholder to maintain at all times a certain
percentage of insurance to the actual value of the property insured. If they
fail to maintain the required percentage, they have to pay part of every loss
themselves.
coinsurer An insurer or insured
that shares losses under a coinsurance agreement.
collateral assignment
The assignment of a policy to a creditor as security for a debt. Under a collateral
assignment, the creditor is entitled to be reimbursed out of policy proceeds
for the amount owed. The beneficiary is entitled to any excess of policy proceeds
over the amount due the creditor in the event of the insured's death.
collusion A secret agreement
between two or more persons to defraud a third party. Collusion with intent
to defraud an insurance company voids coverage under a policy of insurance.
combined ratio
The sum of the expense ratio and the loss ratio. A combined ratio under 100
percent indicates an underwriting profit; a combined ratio over 100 percent
indicates an underwriting loss.
commercial lines
Used to refer to insurance for businesses, professionals, and commercial establishments.
commercial package policy
A policy containing two or more of the following coverage parts: Commercial
Property, Commercial General Liability, Commercial Crime, Commercial Inland
Marine, Boiler and Machinery or Commercial Auto.
commission That portion
of the premium paid to the agent in return for his/her sales and service activities.
common carrier
An individual or corporation that offers its services to the public for the
carrying of persons or property from one place to another for payment.
common disaster clause
A clause sometimes added to a life policy which is designed to provide an
alternate beneficiary in the event that the insured and the original beneficiary
meet death as the result of a common accident.
common law Law based
upon custom, usage and case law of the courts during the past several hundred
years, as distinguished from statute law which is passed by state legislatures
or congress.
comprehensive coverage
This means having a wide scope, including many things. It does not mean including
everything. Thus, a comprehensive liability policy is not an all-risk liability
policy; there are a number of exclusions. However, it does provide far more
protection than a scheduled policy. Often referred to as "comp."
comprehensive personal liability
(CPL) This coverage protects individuals and families from liability for nearly
all types of accidents occurring in their personal lives.
compulsory issuance
Any form of insurance required by law.
concealment Withholding
material facts concerning a risk or a loss. Concealment usually voids coverage.
concurrent insurance
Two or more policies covering the same interest in exactly the same manner
are said to be concurrent. It is extremely important that all fire policies
covering the same risk should be concurrent as to forms and clauses.
conditional binding receipt
A receipt given to an applicant in exchange for an initial premium, sufficient
to bind the company under certain circumstances.
conditions A section in
an insurance contract that lists the duties and responsibilities of both the
insured and insurer.
consequential loss
(or indirect loss) A financial loss that results indirectly from the occurrence
of a direct physical damage or theft loss (e.g., loss of rent or rental value
if a building burns).
conservation Efforts to
prevent current policies from lapsing.
consideration An exchange
of something of value between two parties. This is one of the requirements
of a valid contract. Payment of the premium is an applicant's consideration.
The company's promise to pay proceeds is its consideration.
Consolidated Omnibus Budget Reconciliation Act of 1985
(Cobra) Federal legislation mandating that participants
in health care plans be allowed to continue their coverage, under certain
circumstances for a specific period of time, after it would normally end.
constructive total loss
A partial loss of such severity that the cost of repairing the damaged property
plus salvage value is more than the property is worth in a repaired state.
contingent beneficiary
A person entitled to receive policy benefits if the primary beneficiary is
deceased at the time benefits become payable.
contract An agreement entered
into by two or more persons under which one or more of them agree to do or
refrain from doing acts in accordance with the wishes of the other party(s).
contract carrier
A transportation company that carries the goods of only certain customers,
and not the public in general (as in the case of a common carrier).
contractual liability
Liability assumed under any written or oral contract. This kind of liability
is excluded by the automobile liability policy and most other liability policies.
contribution clause
See coinsurance clause.
contributory negligence
Lack of care by the injured person when such lack of care helps to cause the
accident. Under common law, contributory negligence may bar the right to recover
damages.
controlled business
Business written by a producer covering the life, property or interests of
that producer and members of his or her immediate family.
conversion 1) The wrongful
use of disposition of another person's property by someone who is in lawful
possession of it. 2) In life insurance: changing a life policy, at the policy
owner's request, from a term policy to a permanent policy without new evidence
of insurability. Conditions and limitations in the original term policy vary
by plan.
countersignature Signature
of an insurer's representative validating an insurance contract.
coverage The specific protection
provided by the policy against the results of the hazards insured against.
credit life insurance
Usually written as decreasing term life insurance on a group or an individual.
The amount of coverage is based on the amount of a loan. If the insured borrower
dies, the balance due is canceled.
credit report
(or consumer report) A confidential report obtained from a professional reporting
agency on the financial, physical and moral status of an applicant or insured.
customer A person who secures
insurance through an agent or broker and depends on the agent or broker for
help and advice.
