Insurance Glossary: N-S

Syndicate

A group, association or pool of insurance companies who join economic forces to provide coverage that may be of such total value or high hazard that it can be covered more safely on a cooperative basis. An example is the [...]

Survivors Benefits

Generally, survivor benefits include compensation to dependents of the deceased victim for lost wages and replacement services. In most states, the court sets maximum limits for specific amount and/or by limitations on total benefits that can be received.

Surplus Position Relative to the Companys Risk Profile

This weighs whether or not the insurance company has enough surplus to cover the risks it is assuming. For instance, a company insuring a lot of earthquake risk has a higher risk profile than one writing fire insurance and, therefore, [...]

Surplus Lines

A risk for which there is no readily available insurance market available can be placed with a nonadmitted insurance company on an unregulated basis, in accordance with the surplus or excess line provisions of the state law. For instance, to [...]

Surplus Adequacy

Surplus adequacy is a measure of whether a company’s assets in excess of liabilities are sufficient to pay your benefits even if an unexpected situation occurs. An example would be a very large and rapid increase or decrease in interest [...]

Surplus

This is the amount by which the total company assets exceed the assets earmarked to pay future policy benefits. In other words, surplus consists of the assets that are not expected to be needed to pay future claims.

Supplemental Optional Coverage

This is coverage that is not included in the standard automobile insurance policy. Examples of optional coverage are towing, rental, reimbursement, and special equipment.

Street Rod

A Street Rod is a vehicle or replica over 25 years old which is limited to 2,500 miles or less per year, appreciating in value, with use limited to car shows, events, and an occasional pleasure drive, but specifically not [...]

Stated Amount

Sometimes shown as “Agreed Value,” this is the agreed amount to be paid in the event of a total loss, regardless of the actual value of the vehicle. Few auto insurance companies offer this coverage.

Standard Insurance Company

This is an insurance company that offers policies with all the basic and optional coverages that you would want on one policy at a competitive rate. You can expect to pay much less if you qualify for a preferred or [...]

Standard & Poors

This New York-based rating service bases its judgment of insurers on their claims paying ability. The more reliable a carrier is expected to be in covering its policy liabilities, the higher their rating. Weighing such factors as industry-specific risk, management [...]

Stacking

An insurance practice that increases the money available to pay auto liability claims. In states where this practice is permitted by law, courts may allow policyholders who have several cars insured under a single policy, or multiple vehicles insured under [...]

Spread of Risk

The spread of risks refers to whether or not the risks assumed by the company are spread out or are they concentrated in one type of risk, such as earthquake insurance in California. If the latter is the case, the [...]

Split Limits

This coverage pays a certain amount for each injured person and a total amount per accident for all injured persons. This type of liability limit is expressed in three numbers, such as 250/500/100. Using this example, the first number means [...]

Special Equipment

These would include equipment or accessories installed in your vehicle such as a stereo, CD player or cellular phone. In order to be covered, these must be permanently installed and you may need to request special coverage.

Special Damages – Economic

These are damages that can be measured, such as time off from work. Limits are specific to each state.

Single-Limit

This type of liability limit is expressed in a single number. It is also referred to as Combined Single Limit (CSL). It is the most the insurance company is obligated to pay for damages because of bodily injury or property [...]

Short Rate Cancellation

When an insured cancels a policy midterm or before the expiration date of the policy, the premium refunded to the insured will be surcharged or a penalty will be applied.

Settlement

Usually this is a claims payment or policy benefit. It signals an agreement as to the amount and method of payment. It can also be a conclusion of legal action before the final verdict, by mutual agreement of parties involved.

Secondary Rating Factors

These are factors, such as your sex, marital status, use of vehicles and/or where you live, that are used in addition to the primary or mandatory rating factors, such as your driving record, mileage and/or years of driving experience, to [...]

Risk-Adjusted Capital Ratios

This is about managing the balance between assets and liabilities or debts and establishing the desired ratio. Capital ratios are adjusted for the soundness of the company’s assets and the predictability of its liabilities.

Risk Assessment

Your past experience in the insurance company’s eyes is all about how many automobile losses and violations you have since you began driving. This is variously referred to as the “loss record of the insured,” or “loss experience”, or “loss [...]

Risk

The chance that you will have an accident or loss is a risk and the reason why you buy automobile insurance. The extent of your risk depends on how many miles you drive, your age and experience as a driver [...]

Return Premium

Upon cancellation of an insurance policy prior to the expiration date, the unused portion of the premium is returned to the insured. A return premium can also be made for an overpayment or as a result of reducing your coverage.

Restraints

These are air bags, seatbelts and combination of air bags, seat/shoulder belts. Depending on the state laws and individual carrier, you may need these to avoid a penalty on your premium, or to receive a discount.

Reserve Adequacy

This term is used to describe whether the amount of the assets are able to support future benefit payments.

Reserve

This term applies to the assets that are earmarked to pay future benefits.

Required Optional Coverage

This designates additional deductibles, which insurers must offer and insured may accept. Limits are specific to each state.

Required Deductibles

This designates additional deductibles, which insurers must offer and insured may accept. Limits are specific to each state.

Request for Coverage

This is a required written statement by a potential policyholder, which provides that information that an insurance company relies upon to decide whether to reject or accept the risk of coverage (often an application).

Replacement Services Benefits

These are benefits to pay someone, other than a family member, for services the victim would have normally performed without pay for the benefit of family members, if the victim hadn’t been injured. However, if the insured is collecting work [...]

Replacement

This is a new policy issued to take the place of another policy currently in force. See Renewal Certificate.

Rental Reimbursement

This coverage provides costs for rental car coverage when, for example, the policyholder’s car is stolen or damaged in an accident. This coverage, (available only if you have comprehensive), is subject to a daily limit and maximum dollar amount, which [...]

Renewal Certificate

An insurance company issues this document to its policyholder to show proof of coverage for yet another policy term (after it renews).

Rejection

Coverage is automatically issued to replace an expiring policy.

Reinsurance

Insurance companies need to limit the amount of exposure on any one claim or event to avoid large income fluctuations (or uncertainties) and possible insolvency (or bankruptcy). By sharing the risk with other insurance companies, reinsurance allows an individual insurance [...]

Reinstatement

Putting coverage back into effect after it was cancelled or suspended is called reinstatement.

Registered Owner

This is the person who is named as the owner or responsible party for a vehicle in the records of the state Department of Motor Vehicles.

Recreational Vehicles

Most insurance companies define recreational vehicles as the following: All terrain vehicles, dune buggies, golf carts, mini-bikes, motor homes, motorcycles, recreational vehicle trailers, snowmobiles, trail-bikes, off-road vehicles, antique and classic autos, and various watercraft including jet skis.

Quality of Investments

Analysts look at an insurance company’s investment in terms of type, quality and security and how well they are spread out or diversified. This is an important measure, as the company needs to assess its investment income and eventually sell [...]

Punitive Damages

Also called exemplary damages, these are awarded by the court to acknowledge and punish a negligent party for wanton, reckless or malicious acts of omissions. They are added monetary damages that are over and above the damages paid for injuries [...]

Protection

This term is used interchangeably with “coverage” and “insurance.”

Pro-Rata Cancellation

When policyholders cancel a policy, they are entitled to the unearned portion of the premium for the unused period of the policy. For example, if you paid for a six-month policy, and cancel the policy after three months, you are [...]

Property Damage

Property Damage is the part of your liability coverage that will pay damages to another’s property (up to the limit you purchased) as a result of an accident for which you, or a covered driver on your policy, were found [...]

Proof of Loss

You must make a formal statement regarding your loss before the insurance company will pay a claim. This statement is called Proof of Loss.

Product Lines

These are the types of insurance coverage offered by an insurance company, such as term life, fixed-rate annuity, home, auto, mortgage, watercraft, etc.

Producer

An agent, solicitor or individual, licensed to sell insurance is also known as a producer.

Private Passenger Vehicles

Insurance companies usually define these as four-wheel vehicles that are not used to carry passengers for a fee. Pick-ups and vans qualify, as long as they do not exceed 10,000 lbs. and are not used in a delivery or freight [...]

Priority of Policies

This specifies the order in which different policies apply to a claim when there is more than one policy involved.

Principal Driver

Principal Driver is the person who drives the car most frequently.

Primary Insured

A person who fills out and signs a request for insurance coverage is usually referred to as the primary insured or applicant. This person is generally the intended policyowner and is listed as applicant on the premium due page after [...]

Primary Coverage

This is coverage, such as auto insurance, that provides benefits up to the limits of a policy, regardless of what other insurance policies are in effect. Without this primary layer of coverage, you can not purchase additional coverage such as [...]

Primacy of Benefits

This means that First-Party Benefits must be exhausted before other sources can be called upon when similar benefits are available. This excludes workers’ compensation insurance.

Previously Owned

This is a vehicle that has belonged to someone else prior to your purchasing it. It is also known as a used vehicle.

Premium Notice

Insurance companies or agents notify a policyholder that a premium will be due on a given date. Also referred to as a bill.

Premium Frequency

This is defined as the number of times during the policy year that you need to pay premiums. Frequency options are typically annual, semi-annual, quarterly and monthly.

Premium

This is the amount of money an insurance company charges to provide specific coverage for a specified period of time.

Preferred Risk Insurance Company

This is an insurance company that writes auto insurance policies for drivers who are considered better risks as compared to a Standard, Non-Standard, or Assigned Risk.

Preferred Provider Option

By accepting this option, you agree to repair your car at pre-approved auto repair shops named by the insurance company. Likewise, if you elect a PPO with Medical Coverage, your health care is received from medical doctors approved by the [...]

Pool

This is an association or syndicate of insurance companies who share proportionately in writing auto insurance for people who cannot obtain coverage from the standard sources because of a bad driving record. In some places, it is called the Auto [...]

Policyholder

This is the person who owns the policy. The policyholder is also often referred to as the “insured” and “named insured” or “applicant.”

Policy Reserves

This is the amount of money a company sets aside today, so that after receipt of future premiums, less expenses, the company will have the ability to pay future expected or estimated claims.

Policy Fee

An additional premium charge added to a policy by the agent or broker to service your policy. Your insurance company may add a policy fee to service multiple billing options. See Mode of Premium Payment.

Policy Changes

Additions, deletions, or changes to the coverage of a policy are endorsements or policy changes. These can include the correction of a misspelled name, change of an address, or addition of another vehicle, or increase of liability coverage. These also [...]

Policy

This is a printed document, which is issued by the insurance company and states the terms of the insurance contract. It includes all the attached clauses, riders, endorsements and waivers.

Physically or Mentally Impaired Driver

This is a driver with a restriction on his/her license that refers to a disability. Medical questions asked on the auto request for coverage could also identify a physically or mentally impaired driver.

Physical Damage Insurance

This term indicates coverage from such perils as collision (accident) and comprehensive (fire and theft) to your covered vehicle. If you have borrowed money to buy or lease a car, the lender/leasee may require that you have certain minimum amounts [...]

Persons Excluded

In a No-Fault state, these are the persons to whom First-Party Benefits may or must be withheld from in the event of an accident. Persons intentionally causing injury, vehicle converters, and persons committing felonies are commonly excluded from being covered [...]

Persons Entitled to Benefits

This specifies which persons may receive the First-Party Benefits under a No-Fault policy when the accident occurs in the state where the vehicle is registered (I.S.) and when the accident occurs out-of-state (O.S.). In most states the named insured, relatives, [...]

Personal Lines

This term refers to insurance for individuals and families, including automobile, homeowners, umbrella, fine arts, watercraft, etc.

Personal Injury Protection

PIP is a First Party Benefit available in states with mandatory or optional No-Fault coverage. It usually includes medical expenses, loss of work income, essential services and accidental death and funeral expenses.

Persistency

You may be rewarded with a credit for persistency if you have been insured with a specific company over a period of time with no losses.

Permissive Users

People you permit to borrow your auto are covered as permissive users. However, if the person is not a named driver on the policy, some companies will drop the liability limits to the minimum required in that state.

Passive Disabling

Passive Disabling alarms automatically engage devices that disable the ignition, battery or other vehicle features that a thief would need to steal your car.

Out Of State Coverage

This coverage specifies which persons are entitled to benefits out of state. Example: There is an accident in a Tort state, such as California and Vermont, you No-Fault coverage would be accepted for those drivers specified by your policy and [...]

Other Coverage

Other is a category of coverage on your premium breakdown screen, that refers to the cost of including certain state specific coverage options you’ve selected, such as PIP, Underinsured Motorist, Stacked Uninsured Motorist limits, etc.

Organization Structure

The management of a company can influence how the company handles its daily and long-term operations. Among the management factors to be considered would be whether or not the company has an experienced management team, or does the company have [...]

Operating Performance

This is a measure of how well the company is doing. Many different measures, such as expense ratios, sales performance and policy terminations are taken into consideration when evaluating operating performance.

Operating Leverage

This represents the extent to which a company’s costs of operating are fixed (rent, insurance, executive salaries) as opposed to variable costs (materials, direct labor). Leverage occurs because a company only increases its variable but not fixed costs. The ratio [...]

Odometer

This is the instrument on a vehicle that measures distances traveled.

Occurrence

This is an event, such as an accident or theft that results in a loss for the insured. Coverage typically responds on a “per occurrence basis” or a single event, as opposed to a “claims-made basis”.

Occasional Driver

This is the person who drives the vehicle infrequently.

Notice of Loss

This is when you officially communicate to the insurance company that you have suffered a loss for which you are insured. Also referred to as Claim Report or First Report.

Notice of Cancellation

Written notice of intent to cancel insurance can come from either the company or the insured.

Nonstandard Risk

This pertains to a request for coverage in which the potential policyholder does not satisfy the preferred or standard risk profile of the insurance company.

Nonstandard Insurance Company

An insurance company that provides coverage for those risks that cannot be placed with a preferred, standard or assigned risk insurance company. Typically, they provide coverage to an individual that is considered a higher risk.

Non smoker

Discounts may be available for liability, no fault medical benefits and collision to someone who has not smoked cigarettes or used tobacco products in more than five years. The availability of this discount depends on the insurance company.

Nonresident Agent

This is an individual licensed in a state in which he or she does not reside.

Non-renewal

This is a cancellation of insurance coverage at the expiration date. A nonrenewal can be initiated by the policyholder (insured) or the insurance company. Also referred to as non-renewed.

Nonadmitted Insurer

This insurance company is not licensed to do business in a particular state.

No-fault Insurance

Under a state with a No-Fault system as opposed to a Tort system or Add-On Benefits Systems, your insurance company would pay for medical payments and a portion of your lost wages, regardless of who caused the accident. There are [...]

No-fault Coverage

While it varies from state to state, typically no-fault coverage provides first party benefits for medical expenses, loss of income, loss of services, and funeral expenses resulting from bodily injury to occupants in an accident in a covered vehicle. It [...]

Newly Acquired Autos

Any auto purchased after the effective date, but before the expiration date of an auto policy is considered “newly acquired.” Most companies provide automatic coverage as long as they are notified 7 to 30 days of the purchase.

Negligence

The failure to exercise the care that an ordinary, reasonable person would exercise; either doing that which a prudent person would not do, or failing to do that which a prudent person would do.

National Highway Traffic & Safety Admininstration

This is the division within the Department of Transportation that oversees and administrates safety regulations, such as air bag deactivation, child safety restraint requirements, etc.

National Association of Insurance Commissioners

This organization is comprised of state insurance commissioners and other state officials who have the authority to regulate insurance. They exchange information and promote consistent insurance regulation.

Named Non-owned Auto Coverage

This coverage is for individuals who do not own autos and need insurance because they drive borrowed autos.

Named Insured

This is any person specified by their name as the insured(s) on a policy, typically a single person, or wife and husband.

Named Driver Exclusion

These are drivers in your household or others whom you specify are not to be covered by your insurance policy.

Named Driver

This is a person who is listed on the policy as a driver of any of the covered vehicles.