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much dept your fiancé is
really in?   Find out the
truth before you commit.
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Statewide Investigations Services
Toll Free: 1-888-92-SPY4U
Local: 732- 433-7099
Private Investigator of new Jersey
We are a full service, professional Licensed, Investigative firm
Specializing in but not limited to
*Infidelity -*Cohabitation -*Insurance Fraud - *Child Custody
*We are the Surveillance Experts* of New Jersey
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Insurance Fraud The Official Web Site for The State of
New Jersey Web site is the gateway to NJ information
and services for residents, visitors, and businesses.
New Jersey Private Investigator
New Jersey Private
Investigator
Do you really know how
much dept your fiancé is
really in?   Find out the
truth before you commit.
Find out what they are
really doing when they say
they are on business trips.
Do you really know what
they are doing on the
computer.
Top Seasoned Investigators
Statewide Investigations Services
Toll Free: 1-888-92-SPY4U
Local: 732- 433-7099
Private Investigator of new Jersey
We are a full service, professional Licensed, Investigative firm
Specializing in but not limited to
*Infidelity -*Cohabitation -*Insurance Fraud - *Child Custody
*We are the Surveillance Experts* of New Jersey
Private Investigators NJ
*New Jersey: Licensed - Bonded - Insured*
Prices & Rates [Click here]
Statewide Investigations      Free Consultation Call:      732-433-7099
*Please call and ask as many question as you need*
New Jersey Private Investigator - New Jersey Private Investigations - New Jersey Private Investigators
NJ Investigators - NJ Investigations - NJ Investigator
NJ Private Investigator - NJ Private Investigations - NJ Private Investigators
Insurance Fraud The Official Web Site for The State of
New Jersey Web site is the gateway to NJ information
and services for residents, visitors, and businesses.
______________________________________
No insurance resource would be complete without a comprehensive glossary of terms.
We've compiled a list of terms and their definitions to better help you navigate the
sometimes confusing world of insurance.


Acceleration Clause - The part of a contract that says when a loan may be declared due
and payable.
Accidental Death Benefit - In a life insurance policy, benefit in addition to the death
benefit paid to the beneficiary, should death occur due to an accident. There can be
certain exclusions as well as time and age limits.
Active Participant - Person whose absence from a planned event would trigger a
benefit if the event needs to be canceled or postponed.
Activities of Daily Living - Bathing, preparing and eating meals, moving from room to
room, getting into and out of beds or chairs, dressing, using a toilet.
Actual Cash Value - Cost of replacing damaged or destroyed property with comparable
new property, minus depreciation and obsolescence. For example, a 10-year-old sofa
will not be replaced at current full value because of a decade of depreciation.

Actuary - A specialist in the mathematics of insurance who calculates rates, reserves,
dividends and other statistics. (Americanism: In most other countries the individual is
known as "mathematician.")
Adjustable Rate - An interest rate that changes, based on changes in a published
market-rate index.
Adjuster - A representative of the insurer who seeks to determine the extent of the
insurer's liability for loss when a claim is submitted.
Admitted Assets - Assets permitted by state law to be included in an insurance
company's annual statement. These assets are an important factor when regulators
measure insurance company solvency. They include mortgages, stocks, bonds and real estate.
Agent -individual who sells and services insurance policies in either of two classifications:
1.        Independent agent represents at least two insurance companies and (at least in theory) services clients
by searching the market for the most advantageous price for the most coverage. The agent's commission is a
percentage of each premium paid and includes a fee for servicing the insured's policy.
2.        Direct or career agent represents only one company and sells only its policies. This agent is paid on a
commission basis in much the same manner as the independent agent.
Aggregate Limit - Usually refers to liability insurance and indicates the amount of coverage that the insured has
under the contract for a specific period of time, usually the contract period, no matter how many separate
accidents might occur.
Annual Administrative Fee - Charge for expenses associated with administering a group employee benefit plan.
Annual Crediting Cap - The maximum rate that the equity-indexed annuity can be credited in a year. If a contract
has an upper limit, or cap, of 7 percent and the index linked to the annuity gained 7.2 percent, only 7 percent
would be credited to the annuity.
Annuitization - Process by which you convert part or all of the money in a qualified retirement plan or
nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes
of you and your joint annuitant. Once you choose to annuitize, the payment schedule and the amount is
generally fixed and can't be altered.
Annuitization Options - Choices in the way to annuitize. For example, life with a 10-year period certain means
payouts will last a lifetime, but should the annuitant die during the first 10 years, the payments will continue to
beneficiaries through the 10th year. Selection of such an option reduces the amount of the periodic payment.
Annuity - An agreement by an insurer to make periodic payments that continue during the survival of the
annuitant(s) or for a specified period.
Approved for Reinsurance - Indicates the company is approved (or authorized) to write reinsurance on risks in
this state. A license to write reinsurance might not be required in these states.
Approved or Not Disapproved for Surplus Lines - Indicates the company is approved (or not disapproved) to
write excess or surplus lines in this state.
Assets - Assets refer to "all the available properties of every kind or possession of an insurance company that
might be used to pay its debts." There are three classifications of assets: invested assets, all other assets, and
total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real
estate. All other assets refer to nonincome producing possessions such as the building the company occupies,
office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets
refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some
states don't permit insurance companies to claim certain goods and possessions, such as deferred and unpaid
premiums, in the all other assets category, declaring them "nonadmissable."
Attained Age - Insured's age at a particular time. For example, many term life insurance policies allow an insured
to convert to permanent insurance without a physical examination at the insured's then attained age. Upon
conversion, the premium usually rises substantially to reflect the insured's age and diminished life expectancy.
Authorized Under Federal Products Liability Risk Retention Act (Risk Retention Groups) - Indicates companies
operating under the Federal Products Liability Risk Retention Act of 1981 and the Liability Risk Retention Act of
1986.
Automobile Liability Insurance - Coverage if an insured is legally liable for bodily injury or property damage
caused by an automobile.
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Balance Sheet - An accounting term referring to a listing of a company's assets, liabilities and surplus as of a
specific date.
Benefit Period - In health insurance, the number of days for which benefits are paid to the named insured and
his or her dependents. For example, the number of days that benefits are calculated for a calendar year consist
of the days beginning on Jan. 1 and ending on Dec. 31 of each year.
Best's Capital Adequacy Relativity (BCAR) - This percentage measures a company's relative capital strength
compared to its industry peer composite. A company's BCAR, which is an important component in determining
the appropriateness of its rating, is calculated by dividing a company's capital adequacy ratio by the capital
adequacy ratio of the median of its industry peer composite using Best's proprietary capital mode. Capital
adequacy ratios are calculated as the net required capital necessary to support components of underwriting,
asset, and credit risks in relation to economic surplus.
Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance
companies.
Broker-Agent - Independent insurance salesperson who represents particular insurers but also might function
as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection
and minimize cost. This person is licensed as an agent and a broker.
Business Net Retention - This item represents the percentage of a company's gross writings that are retained
for its own account. Gross writings are the sum of direct writings and assumed writings. This measure excludes
affiliated writings.
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Capital - Equity of shareholders of a stock insurance company. The company's capital and surplus are measured
by the difference between its assets minus its liabilities. This value protects the interests of the company's
policyowners in the event it develops financial problems; the policyowners' benefits are thus protected by the
insurance company's capital. Shareholders' interest is second to that of policyowners.
Capitalization or Leverage - Measures the exposure of a company's surplus to various operating and financial
practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be
exposed to a high risk of instability.
Captive Agent - Representative of a single insurer or fleet of insurers who is obliged to submit business only to
that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer
usually provides its captive agents with an allowance for office expenses as well as an extensive list of
employee benefits such as pensions, life insurance, health insurance, and credit unions.
Case Management - A system of coordinating medical services to treat a patient, improve care and reduce cost.
A case manager coordinates health care delivery for patients.
Casualty - Liability or loss resulting from an accident.
Casualty Insurance - That type of insurance that is primarily concerned with losses caused by injuries to
persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also
includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery,
boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.
Ceded Reinsurance Leverage - The ratio of the reinsurance premiums ceded, plus net ceded reinsurance
balances from non-US affiliates for paid losses, unpaid losses, incurred but not reported (IBNR), unearned
premiums and commissions, less funds held from reinsurers, plus ceded reinsurance balances payable, to
policyholders' surplus. This ratio measures the company's dependence upon the security provided by its
reinsurers and its potential exposure to adjustment on such reinsurance.
Change in Net Premiums Written (IRIS) - The annual percentage change in Net Premiums Written. A company
should demonstrate its ability to support controlled business growth with quality surplus growth from strong
internal capital generation.
Change in Policyholder Surplus (IRIS) - The percentage change in policyholder surplus from the prior year-end
derived from operating earnings, investment gains, net contributed capital and other miscellaneous sources.
This ratio measures a company's ability to increase policyholders' security.
Chartered Property and Casualty Underwriter (CPCU) -Professional designation earned after the successful
completion of 10 national examinations given by the American Institute for Property and Liability Underwriters.
Covers such areas of expertise as insurance, risk management, economics, finance, management, accounting,
and law. Three years of work experience also are required in the insurance business or a related area.
Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by
the policy.
Class 3-6 Bonds (% of PHS) - This test measures exposure to noninvestment grade bonds as a percentage of
surplus. Generally, noninvestment grade bonds carry higher default and illiquidity risks. The designation of
quality classifications that coincide with different bond ratings assigned by major credit rating agencies.
Coinsurance - In property insurance, requires the policyholder to carry insurance equal to a specified
percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of
each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the
policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified
ceiling, the insurer starts paying 100% of losses.
Collision Insurance - Covers physical damage to the insured's automobile (other than that covered under
comprehensive insurance) resulting from contact with another inanimate object.
Combined Ratio After Policyholder Dividends - The sum of the loss, expense and policyholder dividend ratios
not reflecting investment income or income taxes. This ratio measures the company's overall underwriting
profitability, and a combined ratio of less than 100 indicates an underwriting profit.
Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.
Commission - Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The
percentage varies widely depending on coverage, the insurer and the marketing methods.
Common Carrier - A business or agency that is available to the public for transportation of persons, goods or
messages. Common carriers include trucking companies, bus lines and airlines.
Comprehensive Insurance - Auto insurance coverage providing protection in the event of physical damage
(other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be
covered under the comprehensive section.
Concurrent Periods - In hospital income protection, when a patient is confined to a hospital due to more than
one injury and/or illness at the same time, benefits are paid as if the total disability resulted from only one cause.

Conditional Reserves - This item represents the aggregate of various reserves which, for technical reasons,
are treated by companies as liabilities. Such reserves, which are similar to free resources or surplus, include
unauthorized reinsurance, excess of statutory loss reserves over statement reserves, dividends to
policyholders undeclared and other similar reserves established voluntarily or in compliance with statutory
regulations.
Coverage - The scope of protection provided under an insurance policy. In property insurance, coverage lists
perils insured against, properties covered, locations covered, individuals insured, and the limits of
indemnification. In life insurance, living and death benefits are listed.
Convertible - Term life insurance coverage that can be converted into permanent insurance regardless of an
insured's physical condition and without a medical examination. The individual cannot be denied coverage or
charged an additional premium for any health problems.
Copayment - A predetermined, flat fee an individual pays for health-care services, in addition to what insurance
covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level
of services provided during the visit. Copayments are not usually specified by percentages.
Cost-of-Living Adjustment (COLA) - Automatic adjustment applied to Social Security retirement payments when
the consumer price index increases at a rate of at least 3%, the first quarter of one year to the first quarter of
the next year.
Coverage Area - The geographic region covered by travel insurance.
Creditable Coverage - Term means that benefits provided by other drug plans are at least as good as those
provided by the new Medicare Part D program. This may be important to people eligible for Medicare Part D but
who do not sign up at their first opportunity because if the other plans provide creditable coverage, plan
members can later convert to Medicare Part D without paying higher premiums than those in effect during their
open enrollment period.

Current Liquidity (IRIS) - The sum of cash, unaffiliated invested assets and encumbrances on other properties to
net liabilities plus ceded reinsurance balances payable, expressed as a percent. This ratio measures the
proportion of liabilities covered by unencumbered cash and unaffiliated investments. If this ratio is less than
100, the company's solvency is dependent on the collectibility or marketability of premium balances and
investments in affiliates. This ratio assumes the collectibility of all amounts recoverable from reinsurers on paid
and unpaid losses and unearned premiums.
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Death Benefit - The limit of insurance or the amount of benefit that will be paid in the event of the death of a
covered person.
Deductible - Amount of loss that the insured pays before the insurance kicks in.
Developed to Net Premiums Earned - The ratio of developed premiums through the year to net premiums
earned. If premium growth was relatively steady, and the mix of business by line didn't materially change, this
ratio measures whether or not a company's loss reserves are keeping pace with premium growth.
Development to Policyholder Surplus (IRIS) - The ratio measures reserve deficiency or redundancy in relation to
policyholder surplus. This ratio reflects the degree to which year-end surplus was either overstated (+) or
understated (-) in each of the past several years, if original reserves had been restated to reflect subsequent
development through year end.
Direct Premiums Written - The aggregate amount of recorded originated premiums, other than reinsurance,
written during the year, whether collected or not, at the close of the year, plus retrospective audit premium
collections, after deducting all return premiums.
Direct Writer - An insurer whose distribution mechanism is either the direct selling system or the exclusive
agency system.
Disease Management - A system of coordinated health-care interventions and communications for patients with
certain illnesses.
Dividend - The return of part of the policy's premium for a policy issued on a participating basis by either a
mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.
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Earned Premium - The amount of the premium that as been paid for in advance that has been "earned" by virtue
of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year
old would have only partly earned the premium.
Elimination Period - The time which must pass after filing a claim before policyholder can collect insurance
benefits. Also known as "waiting period."
Employers Liability Insurance - Coverage against common law liability of an employer for accidents to
employees, as distinguished from liability imposed by a workers' compensation law.
Encumbrance - A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The
interest of the property owner is reduced by the amount of the encumbrance.
Exclusions - Items or conditions that are not covered by the general insurance contract.
Expense Ratio - The ratio of underwriting expenses (including commissions) to net premiums written. This ratio
measures the company's operational efficiency in underwriting its book of business.
Exposure - Measure of vulnerability to loss, usually expressed in dollars or units.
Extended Replacement Cost - This option extends replacement cost loss settlement to personal property and to
outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations
on certain kinds of personal property; includes inflation protection coverage.
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File-and-Use Rating Laws - State-based laws which permit insurers to adopt new rates without the prior
approval of the insurance department. Usually insurers submit their new rates with supporting statistical data.
Financing Entity - Provides money for purchases.
Floater - A separate policy available to cover the value of goods beyond the coverage of a standard renters
insurance policy including movable property such as jewelry or sports equipment.
Future Purchase Option - Life and health insurance provisions that guarantee the insured the right to buy
additional coverage without proving insurability. Also known as "guaranteed insurability option."
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General Account - All premiums are paid into an insurer's general account. Thus, buyers are subject to
credit-risk exposure to the insurance company, which is low but not zero.
General Liability Insurance -Insurance designed to protect business owners and operators from a wide variety
of liability exposures. Exposures could include liability arising from accidents resulting from the insured's
premises or operations, products sold by the insured, operations completed by the insured, and contractual
liability.
Grace Period - The length of time (usually 31 days) after a premium is due and unpaid during which the policy,
including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to
have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60
days following the date cash value becomes insufficient to support the payment of monthly insurance costs.
Gross Leverage - The sum of net leverage and ceded reinsurance leverage. This ratio measures a company's
gross exposure to pricing errors in its current book of business, to errors of estimating its liabilities, and
exposure to its reinsurers.
Guaranteed Insurability Option - See "future purchase option."
Guaranteed Issue Right - The right to purchase insurance without physical examination; the present and past
physical condition of the applicant are not considered.
Guaranteed Renewable - A policy provision in many products which guarantees the policyowner the right to
renew coverage at every policy anniversary date. The company does not have the right to cancel coverage
except for nonpayment of premiums by the policyowner; however, the company can raise rates if they choose.
Guaranty Association - An organization of life insurance companies within a state responsible for covering the
financial obligations of a member company that becomes insolvent.
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Hazard - A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of
explosives in a home basement is a hazard that increases the probability of an explosion.
Hazardous Activity - Bungee jumping, scuba diving, horse riding and other activities not generally covered by
standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover
liability and personal accident, which should be provided by the company hosting the activity.
Health Maintenance Organization (HMO) - Prepaid group health insurance plan that entitles members to
services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members
must use contracted health-care providers.
Health Reimbursement Arrangement - Owners of high-deductible health plans who are not qualified for a health
savings account can use an HRA.
Health Savings Account - Plan that allows you to contribute pre-tax money to be used for qualified medical
expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.
Hurricane Deductible - Amount you must pay out-of-pocket before hurricane insurance will kick in. Many
insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for
storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage
deductibles vary from one percent of a home's insured value to 15 percent, depending on many factors that
differ by state and insurer.
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Impaired Insurer - An insurer which is in financial difficulty to the point where its ability to meet financial
obligations or regulatory requirements is in question.
Indemnity - Restoration to the victim of a loss by payment, repair or replacement.
Independent Insurance Agents & Brokers of America (IIABA) - Formerly the Independent Insurance Agents of
America (IIAA), this is a member organization of independent agents and brokers monitoring and affecting
industry issues. Numerous state associations are affiliated with the IIABA.
Income Taxes - Incurred income taxes (including income taxes on capital gains) reported in each annual
statement for that year.
Inflation Protection - An optional property coverage endorsement offered by some insurers that increases the
policy's limits of insurance during the policy term to keep pace with inflation.
Insurable Interest - Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability
for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an
"as needed" basis and might work for several insurance companies at the same time. Independent adjusters
charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in
the settlement of claims and receive a percentage of the claim as their fee. A.M. Best's Directory of
Recommended Insurance Attorneys and Adjusters lists independent adjusters only.
Insurance Attorneys - An attorney who practices the law as it relates to insurance matters. Attorneys might be
solo practitioners or work as part of a law firm. Insurance companies who retain attorneys to defend them
against law suits might hire staff attorneys to work for them in-house or they might retain attorneys on an
as-needed basis. A.M. Best's Directory of Recommended Attorneys and Adjusters lists insurance defense
attorneys who concentrate their practice in insurance defense such as coverage issues, bad faith, malpractice,
products liability, and workers' compensation.
Insurance Institute of America (IIA) - An organization which develops programs and conducts national
examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss
control management.
Interest-Crediting Methods - There are at least 35 interest-crediting methods that insurers use. They usually
involve some combination of point-to-point, annual reset, yield spread, averaging, or high water mark.
Investment Income - The return received by insurers from their investment portfolios including interest,
dividends and realized capital gains on stocks. It doesn't include the value of any stocks or bonds that the
company currently owns.
Investments in Affiliates - Bonds, stocks, collateral loans, short-term investments in affiliated and real estate
properties occupied by the company.
Insurance Regulatory Information System (IRIS) - Introduced by the National Association of Insurance
Commissioners in 1974 to identify insurance companies that might require further regulatory review.
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Laddering - Purchasing bond investments that mature at different time intervals.
Lapse Ratio - The ratio of the number of life insurance policies that lapsed within a given period to the number
in force at the beginning of that period.
Least Expensive Alternative Treatment - The amount an insurance company will pay based on its determination
of cost for a particular procedure.
Leverage or Capitalization - Measures the exposure of a company's surplus to various operating and financial
practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be
exposed to a high risk of instability.
Liability - Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liability Insurance - Insurance that pays and renders service on behalf of an insured for loss arising out of his
responsibility, due to negligence, to others imposed by law or assumed by contract.
Licensed - Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted)
insurer for this state to write specific lines of business for which it qualifies.
Licensed for Reinsurance Only - Indicates the company is a licensed (admitted) insurer to write reinsurance on
risks in this state.
Lifetime Reserve Days - Sixty additional days Medicare pays for when you are hospitalized for more than 90 days
in a benefit period. These days can only be used once during your lifetime. For each lifetime reserve day,
Medicare pays all covered costs except for a daily coinsurance amount.
Liquidity - Liquidity is the ability of an individual or business to quickly convert assets into cash without
incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick liquidity refers to
funds--cash, short-term investments, and government bonds--and possessions which can immediately be
converted into cash in the case of an emergency. Current liquidity refers to current liquidity plus possessions
such as real estate which cannot be immediately liquidated, but eventually can be sold and converted into cash.
Quick liquidity is a subset of current liquidity. This reflects the financial stability of a company and thus their
rating.
Living Benefits - This feature allows you, under certain circumstances, to receive the proceeds of your life
insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for
long-term care, or confinement to a nursing home. Also known as "accelerated death benefits."
Lloyd's - Generally refers to Lloyd's of London, England, an institution within which individual underwriters
accept or reject the risks offered to them. The Lloyd's Corp. provides the support facility for their activities.
Lloyds Organizations - These organizations are voluntary unincorporated associations of individuals. Each
individual assumes a specified portion of the liability under each policy issued. The underwriters operate
through a common attorney-in-fact appointed for this purpose by the underwriters. The laws of most states
contain some provisions governing the formation and operation of such organizations, but these laws don't
generally provide as strict a supervision and control as the laws dealing with incorporated stock and mutual
insurance companies.
Loss Adjustment Expenses - Expenses incurred to investigate and settle losses.
Loss and Loss-Adjustment Reserves to Policyholder Surplus Ratio - The higher the multiple of loss reserves to
surplus, the more a company's solvency is dependent upon having and maintaining reserve adequacy.
Losses and Loss-Adjustment Expenses - This represents the total reserves for unpaid losses and
loss-adjustment expenses, including reserves for any incurred but not reported losses, and supplemental
reserves established by the company. It is the total for all lines of business and all accident years.
Loss Control - All methods taken to reduce the frequency and/or severity of losses including exposure
avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A
combination of risk control techniques with risk financing techniques forms the nucleus of a risk management
program. The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and
other techniques that minimize the risks of a business, individual, or organization.
Loss Ratio - The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio
measures the company's underlying profitability, or loss experience, on its total book of business.
Loss Reserve - The estimated liability, as it would appear in an insurer's financial statement, for unpaid
insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred
but not reported (IBNR), losses due but not yet paid, and amounts not yet due. For individual claims, the loss
reserve is the estimate of what will ultimately be paid out on that claim.
Losses Incurred (Pure Losses) - Net paid losses during the current year plus the change in loss reserves since
the prior year end.
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Medical Loss Ratio - Total health benefits divided by total premium.
Member Month - Total number of health plan participants who are members for each month.
Mortality and Expense Risk Fees - A charge that covers such annuity contract guarantees as death benefits.
Mortgage Insurance Policy - In life and health insurance, a policy covering a mortgagor with benefits intended
to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage
in case of the insured's death or disability.
Mutual Insurance Companies - Companies with no capital stock, and owned by policyholders. The earnings of
the company--over and above the payments of the losses, operating expenses and reserves--are the property
of the policyholders. There are two types of mutual insurance companies. A nonassessable mutual charges a
fixed premium and the policyholders cannot be assessed further. Legal reserves and surplus are maintained to
provide payment of all claims. Assessable mutuals are companies that charge an initial fixed premium and, if
that isn't sufficient, might assess policyholders to meet losses in excess of the premiums that have been
charged.
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Named Perils - Perils specifically covered on insured property.
National Association of Insurance Commissioners (NAIC) - Association of state insurance commissioners whose
purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws
for passage by state legislatures.
Net Income - The total after-tax earnings generated from operations and realized capital gains as reported in
the company's NAIC annual statement on page 4, line 16.
Net Investment Income - This item represents investment income earned during the year less investment
expenses and depreciation on real estate. Investment expenses are the expenses related to generating
investment income and capital gains but exclude income taxes.
Net Leverage - The sum of a company's net premium written to policyholder surplus and net liabilities to
policyholder surplus. This ratio measures the combination of a company's net exposure to pricing errors in its
current book of business and errors of estimation in its net liabilities after reinsurance, in relation to
policyholder surplus.
Net Liabilities to Policyholder Surplus - Net liabilities expressed as a ratio to policyholder surplus. Net liabilities
equal total liabilities less conditional reserves, plus encumbrances on real estate, less the smaller of
receivables from or payable to affiliates. This ratio measures company's exposures to errors of estimation in its
loss reserves and all other liabilities. Loss-reserve leverage is generally the key component of net liability
leverage. The higher the loss-reserve leverage the more critical a company's solvency depends upon
maintaining reserve adequacy.
Net Premium - The amount of premium minus the agent's commission. Also, the premium necessary to cover
only anticipated losses, before loading to cover other expenses.
Net Premiums Earned - The adjustment of net premiums written for the increase or decrease of the company's
liability for unearned premiums during the year. When an insurance company's business increases from year to
year, the earned premiums will usually be less than the written premiums. With the increased volume, the
premiums are considered fully paid at the inception of the policy so that, at the end of a calendar period, the
company must set up premiums representing the unexpired terms of the policies. On a decreasing volume, the
reverse is true.
Net Premiums Written - Represents gross premium written, direct and reinsurance assumed, less reinsurance
ceded.
Net Underwriting Income - Net premiums earned less incurred losses, loss-adjustment expenses, underwriting
expenses incurred, and dividends to policyholders.
Nonstandard Auto (High Risk Auto or Substandard Auto) - Insurance for motorists who have poor driving
records or have been canceled or refused insurance. The premium is much higher than standard auto due to
the additional risks.
Net Premiums Written to Policyholder Surplus (IRIS) - This ratio measures a company's net retained premiums
written after reinsurance assumed and ceded, in relation to its surplus. This ratio measures the company's
exposure to pricing errors in its current book of business.
Non-Recourse Mortgage - A home loan in which the borrower can never owe more than the home's value at the
time the loan is repaid.
Noncancellable - Contract terms, including costs that can never be changed.
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Occurrence - An event that results in an insured loss. In some lines of business, such as liability, an occurrence
is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from
continuous or repeated exposure which results in bodily injury or property damage neither expected not
intended by the insured.
Operating Cash Flow - Measures the funds generated from insurance operations, which includes the change in
cash and invested assets attributed to underwriting activities, net investment income and federal income taxes.
This measure excludes stockholder dividends, capital contributions, unrealized capital gains/losses and
various noninsurance related transactions with affiliates. This test measures a company's ability to meet current
obligations through the internal generation of funds from insurance operations. Negative balances might
indicate unprofitable underwriting results or low yielding assets.
Operating Ratio (IRIS) - Combined ratio less the net investment income ratio (net investment income to net
premiums earned). The operating ratio measures a company's overall operational profitability from underwriting
and investment activities. This ratio doesn't reflect other operating income/expenses, capital gains or income
taxes. An operating ratio of more than 100 indicates a company is unable to generate profits from its
underwriting and investment activities.
Other Income/Expenses - This item represents miscellaneous sources of operating income or expenses that
principally relate to premium finance income or charges for uncollectible premium and reinsurance business.
Out-of-Pocket Limit - A predetermined amount of money that an individual must pay before insurance will pay
100% for an individual's health-care expenses.
Overall Liquidity Ratio - Total admitted assets divided by total liabilities less conditional reserves. This ratio
indicates a company's ability to cover net liabilities with total assets. This ratio doesn't address the quality and
marketability of premium balances, affiliated investments and other uninvested assets.
Own Occupation - Insurance contract provision that allows policyholders to collect benefits if they can no
longer work in their own occupation.
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Paid-Up Additional Insurance - An option that allows the policyholder to use policy dividends and/or additional
premiums to buy additional insurance on the same plan as the basic policy and at a face amount determined by
the insured's attained age.
Participation Rate - In equity-indexed annuities, a participation rate determines how much of the gain in the
index will be credited to the annuity. For example, the insurance company may set the participation rate at 80%,
which means the annuity would only be credited with 80% of the gain experienced by the index.
Peril - The cause of a possible loss.
Personal Injury Protection - Pays basic expenses for an insured and his or her family in states with no-fault auto
insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection
coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners
insurance.
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 - The written contract effecting insurance, or the certificate thereof, by whatever name called, and
including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Policyholder Dividend Ratio - The ratio of dividends to policyholders related to net premiums earned.
Policyholder Surplus - The sum of paid in capital, paid in and contributed surplus, and net earned surplus,
including voluntary contingency reserves. It also is the difference between total admitted assets and total
liabilities.
Policy or Sales Illustration - Material used by an agent and insurer to show how a policy may perform under a
variety of conditions and over a number of years.
Pre-Existing Condition - A coverage limitation included in many health policies which states that certain physical
or mental conditions, either previously diagnosed or which would normally be expected to require treatment
prior to issue, will not be covered under the new policy for a specified period of time.
Preferred Auto - Auto coverage for drivers who have never had an accident and operates vehicles according to
law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company
would be afraid to take them on as risk.
Preferred Provider Organization - Network of medical providers who charge on a fee-for-service basis, but are
paid on a negotiated, discounted fee schedule.
Premium - The price of insurance protection for a specified risk for a specified period of time.
Premium Balances - Premiums and agents' balances in course of collection; premiums, agents' balances and
installments booked but deferred and not yet due; bills receivable, taken for premiums and accrued
retrospective premiums.
Premium Earned - The amount of the premium that as been paid for in advance that has been "earned" by virtue
of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year
old would have only partly earned the premium.
Premium to Surplus Ratio - This ratio is designed to measure the ability of the insurer to absorb above-average
losses and the insurer's financial strength. The ratio is computed by dividing net premiums written by surplus.
An insurance company's surplus is the amount by which assets exceed liabilities. The ratio is computed by
dividing net premiums written by surplus. For example, a company with $2 in net premiums written for every $1
of surplus has a 2-to-1 premium to surplus ratio. The lower the ratio, the greater the company's financial
strength. State regulators have established a premium-to-surplus ratio of no higher than 3-to-1 as a guideline.
Premium Unearned - That part of the premium applicable to the unexpired part of the policy period.
Pretax Operating Income - Pretax operating earnings before any capital gains generated from underwriting,
investment and other miscellaneous operating sources.
Pretax Return on Revenue - A measure of a company's operating profitability and is calculated by dividing
pretax operating earnings by net premiums earned.
Private-Passenger Auto Insurance Policyholder Risk Profile - This refers to the risk profile of auto insurance
policyholders and can be divided into three categories: standard, nonstandard and preferred. In the eyes of an
insurance company, it is the type of business (or the quality of driver) that the company has chosen to taken on.
Profit - A measure of the competence and ability of management to provide viable insurance products at
competitive prices and maintain a financially strong company for both policyholders and stockholders.
Protected Cell Company (PCC) - A PCC is a single legal entity that operates segregated accounts, or cells, each
of which is legally protected from the liabilities of the company's other accounts. An individual client's account
is insulated from the gains and losses of other accounts, such that the PCC sponsor and each client are
protected against liquidation activities by creditors in the event of insolvency of another client.
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Qualified High-Deductible Health Plan - A health plan with lower premiums that covers health-care expenses
only after the insured has paid each year a large amount out of pocket or from another source. To qualify as a
health plan coupled with a Health Savings Account, the Internal Revenue Code requires the deductible to be at
least $1,000 for an individual and $2,000 for a family. High-deductible plans are also known as catastrophic plans.
Qualified Versus Non-Qualified Policies - Qualified plans are those employee benefit plans that meet Internal
Revenue Service requirements as stated in IRS Code Section 401a. When a plan is approved, contributions
made by the employer are tax deductible expenses.
Qualifying Event - An occurrence that triggers an insured's protection.
Quick Assets - Assets that are quickly convertible into cash.
Quick Liquidity Ratio - Quick assets divided by net liabilities plus ceded reinsurance balances payable. Quick
assets are defined as the sum of cash, unaffiliated short-term investments, unaffiliated bonds maturing within
one year, government bonds maturing within five years, and 80% of unaffiliated common stocks. These assets
can be quickly converted into cash in the case of an emergency.
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Reciprocal Insurance Exchange - An unincorporated groups of individuals, firms or corporations, commonly
termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk.
Its chief administrator is an attorney-in-fact.
Re-Entry - Re-entry, which is the allowance for level-premium term policyowners to qualify for another
level-premium period, generally with new evidence of insurability.
Reinsurance - In effect, insurance that an insurance company buys for its own protection. The risk of loss is
spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance
enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding
volume; secure catastrophe protection against shock losses; withdraw from a line of business or a
geographical area within a specified time period.
Reinsurance Ceded - The unit of insurance transferred to a reinsurer by a ceding company.
Reinsurance Recoverables to Policyholder Surplus - Measures a company's dependence upon its reinsurers
and the potential exposure to adjustments on such reinsurance. Its determined from the total ceded
reinsurance recoverables due from non-U.S. affiliates for paid losses, unpaid losses, losses incurred but not
reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent
of policyholder surplus.
Renewal - The automatic re-establishment of in-force status effected by the payment of another premium.
Replacement Cost - The dollar amount needed to replace damaged personal property or dwelling property
without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of
the policy.
Reserve - An amount representing actual or potential liabilities kept by an insurer to cover debts to
policyholders. A reserve is usually treated as a liability.
Residual Benefit - In disability insurance, a benefit paid when you suffer a loss of income due to a covered
disability or if loss of income persists. This benefit is based on a formula specified in your policy and it is
generally a percentage of the full benefit. It may be paid up to the maximum benefit period.
Return on Policyholder Surplus (Return on Equity) - The sum of after-tax net income and unrealized capital
gains, to the mean of prior and current year-end policyholder surplus, expressed as a percent. This ratio
measures a company's overall after-tax profitability from underwriting and investment activity.
Risk Class - Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical
underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and
female.
Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all
exposures to the possibility of loss and determining how to handle these exposures through practices such as
avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
Risk Retention Groups - Liability insurance companies owned by their policyholders. Membership is limited to
people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume
and spread liability exposure to group members and to provide an alternative risk financing mechanism for
liability. These entities are formed under the Liability Risk Retention Act of 1986. Under law, risk retention
groups are precluded from writing certain coverages, most notably property lines and workers' compensation.
They predominately write medical malpractice, general liability, professional liability, products liability and
excess liability coverages. They can be formed as a mutual or stock company, or a reciprocal.
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Secondary Market - The secondary market is populated by buyers willing to pay what they determine to be fair
market value.
Section 1035 Exchange - This refers to a part of the Internal Revenue Code that allows owners to replace a life
insurance or annuity policy without creating a taxable event.
Section 7702 - Part of the Internal Revenue Code that defines the conditions a life policy must satisfy to qualify
as a life insurance contract, which has tax advantages.
Separate Account - A separate account is an investment option that is maintained separately from an insurer's
general account. Investment risk associated with separate-account investments is born by the contract owner.
Solvency - Having sufficient assets--capital, surplus, reserves--and being able to satisfy financial
requirements--investments, annual reports, examinations--to be eligible to transact insurance business and
meet liabilities.
Standard Auto - Auto insurance for average drivers with relatively few accidents during lifetime.
State of Domicile - The state in which the company is incorporated or chartered. The company also is licensed
(admitted) under the state's insurance statutes for those lines of business for which it qualifies.
Statutory Reserve - A reserve, either specific or general, required by law.
Stock Insurance Company - An incorporated insurer with capital contributed by stockholders, to whom earnings
are distributed as dividends on their shares.
Stop Loss - Any provision in a policy designed to cut off an insurer's losses at a given point.
Subaccount Charge - The fee to manage a subaccount, which is an investment option in variable products that
is separate from the general account.
Subrogation - The right of an insurer who has taken over another's loss also to take over the other person's
right to pursue remedies against a third party.
Successive Periods - In hospital income protection, when confinements in a hospital are due to the same or
related causes and are separated by less than a contractually stipulated period of time, they are considered
part of the same period of confinement.
Surplus - The amount by which assets exceed liabilities.
Surrender Charge - Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its
cash value. This fee reflects expenses the insurance company incurs by placing the policy on its books, and
subsequent administrative expenses.
Surrender Period - A set amount of time during which you have to keep the majority of your money in an annuity
contract. Most surrender periods last from five to 10 years. Most contracts will allow you to take out at least 10%
a year of the accumulated value of the account, even during the surrender period. If you take out more than
that 10%, you will have to pay a surrender charge on the amount that you have withdrawn above that 10%.
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Term Life Insurance - Life insurance that provides protection for a specified period of time. Common policy
periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up
any of the nonforfeiture values associated with whole life policies.
Tort - A private wrong, independent of contract and committed against an individual, which gives rise to a legal
liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance
is mainly purchased to cover unintentional torts.
Total Admitted Assets - This item is the sum of all admitted assets, and are valued in accordance with state laws
and regulations, as reported by the company in its financial statements filed with state insurance regulatory
authorities. This item is reported net as to encumbrances on real estate (the amount of any encumbrances on
real estate is deducted from the value of the real estate) and net as to amounts recoverable from reinsurers
(which are deducted from the corresponding liabilities for unpaid losses and unearned premiums).
Total Annual Loan Cost - The projected annual average cost of a reverse mortgage including all itemized costs.
Total Loss - A loss of sufficient size that it can be said no value is left. The complete destruction of the property.
The term also is used to mean a loss requiring the maximum amount a policy will pay.
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Umbrella Policy - Coverage for losses above the limit of an underlying policy or policies such as homeowners
and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of
coverage are sometimes broader than those of underlying policies.
Unaffiliated Investments - These investments represent total unaffiliated investments as reported in the exhibit
of admitted assets. It is cash, bonds, stocks, mortgages, real estate and accrued interest, excluding investment
in affiliates and real estate properties occupied by the company.
Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an
insurer.
Underwriting - The process of selecting risks for insurance and classifying them according to their degrees of
insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks
that do not qualify.
Underwriting Expenses Incurred - Expenses, including net commissions, salaries and advertising costs, which
are attributable to the production of net premiums written.
Underwriting Expense Ratio - This represents the percentage of a company's net premiums written that went
toward underwriting expenses, such as commissions to agents and brokers, state and municipal taxes, salaries,
employee benefits and other operating costs. The ratio is computed by dividing underwriting expenses by net
premiums written. The ratio is computed by dividing underwriting expenses by net premiums written. A company
with an underwriting expense ratio of 31.3% is spending more than 31 cents of every dollar of net premiums
written to pay underwriting costs. It should be noted that different lines of business have intrinsically differing
expense ratios. For example, boiler and machinery insurance, which requires a corps of skilled inspectors, is a
high expense ratio line. On the other hand, expense ratios are usually low on group health insurance.
Underwriting Guide - Details the underwriting practices of an insurance company and provides specific
guidance as to how underwriters should analyze all of the various types of applicants they might encounter.
Also called an underwriting manual, underwriting guidelines, or manual of underwriting policy.
Unearned Premiums - That part of the premium applicable to the unexpired part of the policy period.
Uninsured Motorist Coverage - Endorsement to a personal automobile policy that covers an insured collision
with a driver who does not have liability insurance.
Universal Life Insurance - A combination flexible premium, adjustable life insurance policy.
Usual, Customary and Reasonable Fees - An amount customarily charged for or covered for similar services and
supplies which are medically necessary, recommended by a doctor or required for treatment.
Utilization - How much a covered group uses a particular health plan or program.
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Valuation - A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial
condition of a pension plan.
Valuation Reserve - A reserve against the contingency that the valuation of assets, particularly investments,
might be higher than what can be actually realized or that a liability may turn out to be greater than the valuation
placed on it.
Variable Annuitization - The act of converting a variable annuity from the accumulation phase to the payout
phase.
Variable Life Insurance - A form of life insurance whose face value fluctuates depending upon the value of the
dollar, securities or other equity products supporting the policy at the time payment is due.
Variable Universal Life Insurance - A combination of the features of variable life insurance and universal life
insurance under the same contract. Benefits are variable based on the value of underlying equity investments,
and premiums and benefits are adjustable at the option of the policyholder.
Viatical Settlement Provider - Someone who serves as a sales agent, but does not actually purchase policies.
Viator - The terminally ill person who sells his or her life insurance policy.
Voluntary Reserve - An allocation of surplus not required by law. Insurers often accumulate such reserves to
strengthen their financial structure.
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Waiting Period - See "elimination period."
Waiver of Premium - A provision in some insurance contracts which enables an insurance company to waive the
collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of
an accident or injury. The waiver of premium for disability remains in effect as long as the ensured is disabled.
Whole Life Insurance - Life insurance which might be kept in force for a person's whole life and which pays a
benefit upon the person's death, whenever that might be.
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Yield on Invested Assets (IRIS) - Annual net investment income after expenses, divided by the mean of cash
and net invested assets. This ratio measures the average return on a company's invested assets. This ratio is
before capital gains/losses and income taxes.

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