What to do in the event of a claim
1 – Gather information
Obtain the name of the other driver and license number of the other vehicle.
Take the necessary precautions to protect your property from further damage.
In the event of personal injury, obtain the names and addresses of individuals involved and witnesses.
2 – Do not discuss details
Do not discuss the details of the accident with anyone but the investigating police officer.
3 – Contact your agency
Call your local independent Auto-Owners agent. Your agent will then immediately set your claim in motion by notifying the local Auto-Owners claim office on your behalf.
4 – Reporting a Claim After Regular Business Hours
If you are unable to reach your independent agent after regular business hours, we provide an Emergency After Hours Phone Service from 4:30 P.M. through 8:00 A.M. Eastern Time, Monday through Friday, and twenty-four (24) hours a day on Saturday, Sunday and all holidays.
Life Insurance Information Offered by Auto Owners
What Types of Life Insurance Are Available?
Permanent Insurance is designed to provide life-long coverage with benefits and features usually not available with term life insurance policies. Cash value is available for emergencies, family members can be included and coverage premium payments generally remain level. The following permanent programs are available.
- Universal Life Insurance
- Whole Life Insurance
- Simplified Issue Whole Life Insurance
- Simplified Issue Children’s Advantage Plan Plus® Life Insurance
Universal Life Insurance
Provides immediate cash value, flexible premium payment plans, tax deferred savings and guaranteed death benefits. Auto-Owners Perma Term 2 and 3 Universal Life programs can be custom designed to fit individual protection needs, financial security needs and supplement retirement needs.
Whole Life Insurance
Provides level death benefit protection with level premiums and guaranteed cash values. Auto-Owners Whole Life insurance can provide needed cash value for emergency family needs and can help supplement future retirement income.
Simplified Issue Whole Life
This plan offers guaranteed premiums, death benefit protection and cash values to age 110 for insureds age 50-80. Provides coverage for final expenses, such as medical and hospital expenses, outstanding debts and funeral costs. Easy-to-complete short form application with minimal underwriting requirements.
Simplified Issue Children’s Advantage Plan Plus®
This plan offers guaranteed premiums, death benefit protection and cash values to age 110 for insureds 15 days through age 17. The death benefit will increase automatically 50% at age 18 and then again at age 25, with no increase in premium. An annuity rider is available in all states except Florida and Minnesota.
Term Insurance provides coverage for a specified period of time such as 10, 20 or 30 years. It is designed to protect short-term needs such as debt obligations, mortgages or protection while children are young. Typically, term insurance does not provide cash value. The following term products may fit your needs.
10, 20 and 30 Year Level Term Insurance
These programs provide level death benefits for either 10, 20 or 30 years. They can include a guaranteed premium and renewal benefit at the policyholder’s option.
Simplified Issue 5 Year Level Term
This plan provides low-cost level death benefit protection for short-term needs such as debt obligations. Easy-to-complete short form application with minimal underwriting requirements.
NOTE: Coverages or discounts may not apply in all states. Some exclusions and limitations may apply.
Most Auto-Owners Life Insurance Products can include these optional additional benefits:
Disability Waiver of Premium
Waives premium payments (or cost of insurance charges if Universal Life Insurance) if the insured becomes disabled for six months or longer.
Provides additional death benefits should death occur as a result of an accident.
Insured’s spouse and/or children can be added for life insurance protection.
Mortgage Payment Disability Benefit
Provides money to continue making debt obligation payments if the insured becomes totally disabled for 60 days or longer.
Payor Death and Disability
This additional benefit waives the premium payments (or cost of insurance charges if Universal Life) on a child’s policy if the premium payor becomes disabled or dies.
Guaranteed Purchase Option
Provides opportunities to purchase additional life insurance protection at certain ages without proving insurability.
NOTE: Coverages or discounts may not apply in all states. Some exclusions and limitations may apply.
Regardless which program fits your specific needs, Auto-Owners Life Insurance Company products are among the best in the industry. We pride ourselves in providing high quality, fairly priced life insurance, disability income, long term care and annuity programs.
A Helpful Glossary of Insurance Terms
ACCIDENT AND HEALTH INSURANCE: Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.
ACTUAL CASH VALUE: A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.
ACTUARY: An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.
ADDITIONAL LIVING EXPENSES: Extra charges covered by homeowners policies over and above the policyholder’s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
ADJUSTER: An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
ADMITTED ASSETS: Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets.
ADMITTED COMPANY: An insurance company licensed and authorized to do business in a particular state.
AFFINITY SALES: Selling insurance through groups such as professional and business associations.
AGENCY COMPANIES: Companies that market and sell products via independent agents.
AGENT: Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
ALLIED LINES: Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.
ALTERNATIVE DISPUTE RESOLUTION / ADR: An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
ANNUAL STATEMENT: Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.
ANNUITANT: The person who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.
ANNUITY: A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.
ANTITRUST LAWS: Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
APPORTIONMENT: The dividing of a loss proportionately among two or more insurers that cover the same loss.
APPRAISAL: A survey to determine a property’s insurable value, or the amount of a loss.
ARBITRATION: Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
ARSON: The deliberate setting of a fire.
ASSETS: Property owned, in this case by an insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due.
ASSIGNED RISK PLANS: Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market.
AUTO INSURANCE POLICY: There are basically six different types of coverages. Some may be required by law. Others are optional. They are: Bodily injury liability, for injuries the policyholder causes to someone else. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car. Property damage liability, for damage the policyholder causes to someone else’s property. Collision, for damage to the policyholder’s car from a collision. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
AUTO INSURANCE PREMIUM: The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day/rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information.
AVIATION INSURANCE: Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.
BALANCE SHEET: Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.
BANK HOLDING COMPANY: A company that owns or controls one or more banks. The Federal Reserve has responsibility for regulating and supervising bank holding company activities, such as approving acquisitions and mergers and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the Comptroller of the Currency or the FDIC.
BEACH AND WINDSTORM PLANS: State-sponsored insurance pools that sell property coverage for the peril of windstorm to people unable to buy it in the voluntary market because of their high exposure to risk. Seven states (AL, FL, LA, MS, NC, SC, TX) offer these plans to cover residential and commercial properties against hurricanes and other windstorms. Georgia and New York provide this kind of coverage for windstorm and hail in certain coastal communities through other property pools. Insurance companies that sell property insurance in the state are required to participate in these plans. Insurers share in profits and losses.
BINDER: Temporary authorization of coverage issued prior to the actual insurance policy.
BLANKET INSURANCE: Coverage for more than one type of property at one location or one type of property at more than one location. Example: chain store
BODILY INJURY LIABILITY COVERAGE: Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
BOILER AND MACHINERY INSURANCE: Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone and computer systems.
BOND: A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.
BOOK OF BUSINESS: Total amount of insurance on an insurer’s books at a particular point in time.
BROKER: An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.
BURGLARY AND THEFT INSURANCE: Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
BUSINESS INCOME AND EXTRA EXPENSE INSURANCE: (also known as BUSINESS INTERRUPTION INSURANCE) Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. It also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises. Depending on the policy, civil authorities coverage may start after a waiting period and last for two or more weeks.
BUSINESSOWNERS POLICY: / BOP A policy that combines property, liability and business interruption coverages for small- to medium-sized businesses. Coverage is generally cheaper than if purchased through separate insurance policies.
CAPACITY: The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of a high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.
CAPITAL: Shareholder’s equity (for publicly traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer’s business. A company underwriting medical device manufacturers needs a larger cushion of capital than a company writing Main Street business, for example.
CAPTIVE AGENT: A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company.
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.
CATASTROPHE: Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million
CATASTROPHE DEDUCTIBLE: A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.
CATASTROPHE MODEL: Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.
CATASTROPHE REINSURANCE: Reinsurance for catastrophic losses. The insurance industry is able to absorb the multibillion dollar losses caused by natural and man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread among thousands of companies including catastrophe reinsurers who operate on a global basis. Insurers’ ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance. After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume. In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.
CELL PHONE INSURANCE: Separate insurance provided to cover cell phones for damage or theft. Policies are often sold with the cell phones themselves.
CHARTERED FINANCIAL CONSULTANT / ChFC: A professional designation given by The American College to financial services professionals who complete courses in financial planning.
CHARTERED LIFE UNDERWRITER / CLU: A professional designation by The American College for those who pass business examinations on insurance, investments and taxation, and have life insurance planning experience.
CHARTERED PROPERTY/CASUALTY UNDERWRITER / CPCU: A professional designation given by the American Institute for Chartered Property Casualty Underwriters. National examinations and three years of work experience are required.
CLAIMS MADE POLICY: A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities.
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.
COLLATERAL: Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. Also called security.
COLLATERAL SOURCE RULE: Bars the introduction of information that indicates a person has been compensated or reimbursed by a source other than the defendant in civil actions related to negligence or other liability.
COLLISION COVERAGE: Portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision.
COMBINED RATIO: Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating.
COMMERCIAL GENERAL LIABILITY INSURANCE / CGL: A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.
COMMERCIAL LINES: Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business income, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, professional liability, surety and fidelity, and workers compensation. Most of these commercial coverages can be purchased separately except business income, which must be added to a fire insurance (property) policy.
COMMERCIAL MULTIPLE PERIL POLICY: Package policy that includes property, boiler and machinery, crime and general liability coverages.
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.
COMPLETED OPERATIONS COVERAGE: Pays for bodily injury or property damage caused by a completed project or job. Protects a business that sells a service against liability claims.
COMPREHENSIVE COVERAGE: Portion of an auto insurance policy that covers damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods and riots), and theft.
COMPULSORY AUTO INSURANCE: The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.
CONTINGENT LIABILITY: Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.
COVERAGE: Synonym for insurance.
CRASH PARTS: Sheet metal parts that are most often damaged in a car crash.
CREDIT SCORE: The number produced by an analysis of an individual’s credit history. The use of credit information affects all consumers in many ways, including getting a job, finding a place to live, securing a loan, getting telephone service and buying insurance. Credit history is routinely reviewed by insurers before issuing a commercial policy because businesses in poor financial condition tend to cut back on safety, which can lead to more accidents and more claims. Auto and home insurers may use information in a credit history to produce an insurance score. Insurance scores may be used in underwriting and rating insurance policies.
CRIME INSURANCE: Term referring to property coverages for the perils of burglary, theft and robbery.
CROP-HAIL INSURANCE: Protection against damage to growing crops from hail, fire or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.
DECLARATION: Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information. Referred to as the “dec page.”
DEDUCTIBLE: The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
DEMUTUALIZATION: The conversion of insurance companies from mutual companies owned by their policyholders into stock companies.
DEREGULATION: In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.
DIFFERENCE IN CONDITIONS: Policy designed to fill in gaps in a business’s commercial property insurance coverage. There is no standard policy. Policies are specifically tailored to the policyholder’s needs.
DIMINUTION OF VALUE: The idea that a vehicle loses value after it has been damaged in an accident and repaired.
DIRECT PREMIUMS: Property/casualty premiums collected by the insurer from policyholders, before reinsurance premiums are deducted. Insurers share some direct premiums and the risk involved with their reinsurers.
DIRECT SALES/ DIRECT RESPONSE: Method of selling insurance directly to the insured through an insurance company’s own employees, through the mail, by telephone or via the Internet. This is in lieu of using captive or exclusive agents.
DIRECT WRITERS: Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, by telephone or via the Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.
DIRECTORS AND OFFICERS LIABILITY INSURANCE/D&O: Directors and officers liability insurance (D&O) covers directors and officers of a company for negligent acts or omissions and for misleading statements that result in suits against the company. There are a variety of D&O coverages. Corporate reimbursement coverage indemnifies directors and officers of the organization. Side-A coverage provides D&O coverage for personal liability when directors and officers are not indemnified by the firm. Entity coverage, for claims made specifically against the company, is also available. D&O policies may be broadened to include coverage for employment practices liability.
DIVIDEND: Money returned to policyholders from an insurance company’s earnings. Considered a partial premium refund rather than a taxable distribution, reflecting the difference between the premium charged and actual losses. Many life insurance policies and some property/casualty policies pay dividends to their owners.
DOMESTIC INSURANCE COMPANY: Term used by a state to refer to any company incorporated there.
EARNED PREMIUM: The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.
EARTHQUAKE INSURANCE: Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.
ECONOMIC LOSS: Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.
ELECTRONIC COMMERCE / E-COMMERCE: The sale of products such as insurance over the Internet.
EMPLOYEE DISHONESTY COVERAGE: Covers direct losses and damage to businesses resulting from the dishonest acts of employees.
EMPLOYEE RETIREMENT INCOME SECURITY ACT / ERISA: Federal legislation that protects employees by establishing minimum standards for private pension and welfare plans.
EMPLOYER’S LIABILITY: Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law.
EMPLOYMENT PRACTICES LIABILITY COVERAGE: Liability insurance for employers that covers wrongful termination, discrimination and other violations of employees’ legal rights.
ENDORSEMENT: A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.
ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE: A form of insurance designed to cover losses and liabilities arising from damage to property caused by pollution.
EQUITY: In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.
ERRORS AND OMISSIONS COVERAGE / E&O: A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
ESCROW ACCOUNT: Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.
EXCESS: AND SURPLUS LINES Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) and must be purchased from a nonadmitted carrier.
EXCESS OF LOSS REINSURANCE: A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a specified portion of a claim and the reinsurer to pay all or a part of the claim above that amount.
EXCLUSION: A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.
EXCLUSIVE AGENT: A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company.
EXCLUSIVE REMEDY: Part of the social contract that forms the basis for workers compensation statutes under which employers are responsible for work-related injury and disease, regardless of whether it was the employee’s fault and in return the injured employee gives up the right to sue when the employer’s negligence causes the harm.
EXPENSE RATIO: Percentage of each premium dollar that goes to insurers’ expenses including overhead, marketing and commissions.
EXPERIENCE: Record of losses.
EXPOSURE: Possibility of loss.
EXTENDED COVERAGE: An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
EXTENDED REPLACEMENT COST COVERAGE: Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction.
FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS: Insurance pools that sell property insurance to people who can’t buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses.
FARMOWNERS-RANCHOWNERS INSURANCE: Package policy that protects the policyholder against named perils and liabilities and usually covers homes and their contents, along with barns, stables and other structures.
FEDERAL INSURANCE ADMINISTRATION / FIA: Federal agency in charge of administering the National Flood Insurance Program. It does not regulate the insurance industry.
FIDELITY BOND: A form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
FIDUCIARY BOND: A type of surety bond, sometimes called a probate bond, which is required of certain fiduciaries, such as executors and trustees, that guarantees the performance of their responsibilities.
FIDUCIARY LIABILITY: Legal responsibility of a fiduciary to safeguard assets of beneficiaries. A fiduciary, for example a pension fund manager, is required to manage investments held in trust in the best interest of beneficiaries. Fiduciary liability insurance covers breaches of fiduciary duty such as misstatements or misleading statements, errors and omissions.
FILE-AND-USE STATES: States where insurers must file rate changes with their regulators, but don’t have to wait for approval to put them into effect.
FINANCIAL RESPONSIBILITY LAW: A state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if involved in an auto accident. Varies from state to state but can be met by carrying a minimum amount of auto liability insurance.
FIRE INSURANCE: Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
FIRST-PARTY COVERAGE: Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services.
FLOATER: Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items.
FLOOD INSURANCE: Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy.
FOREIGN INSURANCE COMPANY: Name given to an insurance company based in one state by the other states in which it does business.
FRAUD: Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents and brokers for financial gain.
FREQUENCY: Number of times a loss occurs. One of the criteria used in calculating premium rates.
GAP INSURANCE: An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES/GAAP: Generally accepted accounting principles (GAAP) accounting is used in financial statements that publicly held companies prepare for the Securities and Exchange Commission.
GENERIC AUTO PARTS: Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical part produced by the OEM.
GLASS INSURANCE: Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass and mirrors. Available with or without a deductible.
GRADUATED DRIVER LICENSES: Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict nighttime driving. Young drivers receive a learner’s permit, followed by a provisional license, before they can receive a standard driver’s license.
GRAMM-LEACH-BLILEY ACT: Financial services legislation, passed by Congress in 1999, that removed Depression era prohibitions against the combination of commercial banking and investment banking activities. It allows insurance companies, banks and securities firms to engage in each others’ activities and own one another.
GROUP INSURANCE: A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
GUARANTEED REPLACEMENT COST COVERAGE: Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit.
GUARANTY FUND: The mechanism by which solvent insurers ensure that some of the policyholder and third-party claims against insurance companies that fail are paid. Such funds are required in all 50 states, the District of Columbia and Puerto Rico, but the type and amount of claim covered by the fund varies from state to state. Some states pay policyholders’ unearned premiums – the portion of the premium for which no coverage was provided because the company was insolvent. Some have deductibles. Most states have no limits on workers compensation payments. Guaranty funds are supported by assessments on insurers doing business in the state.
HARD MARKET: A seller’s market in which insurance is expensive and in short supply.
HOMEOWNERS INSURANCE POLICY: The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy. Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately.
HURRICANE DEDUCTIBLE: A percentage or dollar amount added to a homeowner’s insurance policy to limit an insurer’s exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the storm for the deductible to be triggered and the extent of the high risk area, vary from insurer to insurer and state to state.
IDENTITY THEFT INSURANCE: Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney’s fees to defend against lawsuits and remove criminal or civil judgments.
INCURRED BUT NOT REPORTED LOSSES / IBNR: Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.
INCURRED LOSSES: Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
INDEMNIFY: Provide financial compensation for losses.
INDEPENDENT AGENT: Agent who is self-employed, is paid on commission, and represents several insurance companies.
INFLATION GUARD CLAUSE: A provision added to a homeowners insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.
INLAND MARINE INSURANCE: This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category.
INSOLVENCY: Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure.
INSURANCE: A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
INSURANCE REGULATORY INFORMATION SYSTEM / IRIS: Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.
INSURANCE SCORE: Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race. Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.
INSURANCE-TO-VALUE: Insurance written in an amount approximating the value of the insured property.
INTERNET LIABILITY INSURANCE: Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.
INVESTMENT INCOME: Income generated by the investment of assets. Insurers have two sources of income, underwriting (premiums less claims and expenses) and investment income. The latter can offset underwriting operations, which are frequently unprofitable.
JOINT UNDERWRITING ASSOCIATION / JUA: Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice.
LAW OF LARGE NUMBERS: The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.
LIABILITY INSURANCE: Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
LIMITS: Maximum amount of insurance that can be paid for a covered loss.
LINE: Type or kind of insurance, such as personal lines.
LIQUIDATION: Enables the state insurance department as liquidator or its appointed deputy to wind up the insurance company’s affairs by selling its assets and settling claims upon those assets. After receiving the liquidation order, the liquidator notifies insurance departments in other states and state guaranty funds of the liquidation proceedings. Such insurance company liquidations are not subject to the Federal Bankruptcy Code but to each state’s liquidation statutes.
LIQUOR LIABILITY: Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.
LONG-TERM CARE INSURANCE: Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as individual insurance or through an employer-sponsored or association plan.
LOSS: A reduction in the quality or value of a property, or a legal liability.
LOSS ADJUSTMENT EXPENSES: The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.
LOSS COSTS: The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
LOSS OF USE: A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
LOSS RATIO: Percentage of each premium dollar an insurer spends on claims.
LOSS RESERVES: The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.
MANAGED CARE: Arrangement between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures agreed on by the medical profession to be cost effective, also known as medical practice guidelines.
MANUAL: A book published by an insurance or bonding company or a rating association or bureau that gives rates, classifications, and underwriting rules.
MARINE INSURANCE: Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ships hull and cargo and perils include collision, sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo to save other property. Wear and tear, dampness, mold, and war are not included.
MCCARRAN-FERGUSON ACT: Federal law signed in 1945 in which Congress declared that states would continue to regulate the insurance business. Grants insurers a limited exemption from federal antitrust legislation.
MEDIATION: Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.
MEDICAID: A federal/state public assistance program created in 1965 and administered by the states for people whose income and resources are insufficient to pay for health care.
MEDICAL MALPRACTICE INSURANCE: See Malpractice insurance
MEDICAL PAYMENTS INSURANCE: A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.
MEDICAL UTILIZATION REVIEW: The practice used by insurance companies to review claims for medical treatment.
MEDICARE: Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.
MEDIGAP/MEDSUP: Policies that supplement federal insurance benefits particularly for those covered under Medicare.
MINE SUBSIDENCE COVERAGE: An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.
MORTGAGE INSURANC:E A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. A variant, mortgage unemployment insurance pays the mortgage of a policyholder who becomes involuntarily unemployed.
MULTIPLE PERIL POLICY: A package policy, such as a homeowners or business insurance policy, that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy. In the early days of insurance, coverages for property damage and liability were purchased separately.
MUTUAL HOLDING COMPANY: An organizational structure that provides mutual companies with the organizational and capital raising advantages of stock insurers, while retaining the policyholder ownership of the mutual.
MUTUAL INSURANCE COMPANY: A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses.
NAMED PERIL: Peril specifically mentioned as covered in an insurance policy.
NATIONAL FLOOD INSURANCE PROGRAM: Federal government-sponsored program under which flood insurance is sold to homeowners and businesses.
NEGLIGENCE: Failure to act with the legally required degree of care for others, resulting in harm to them.
NET PREMIUMS WRITTEN: See Premiums written
NO-FAULT: Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation.
NON-ADMITTED ASSETS: Assets that are not included on the balance sheet of an insurance company, including furniture, fixtures, past-due accounts receivable, and agents’ debt balances.
NON-ADMITTED INSURER: Insurers licensed in some states, but not others. States where an insurer is not licensed call that insurer non-admitted. They sell coverage that is unavailable from licensed insurers within the state.
NO-PAY, NO-PLAY: The idea that people who don’t buy coverage should not receive benefits. Prohibits uninsured drivers from collecting damages from insured drivers. In most states with this law, uninsured drivers may not sue for noneconomic damages such as pain and suffering. In other states, uninsured drivers are required to pay the equivalent of a large deductible ($10,000) before they can sue for property damages and another large deductible before they can sue for bodily harm.
NOTICE OF LOSS: A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder’s responsibilities after a loss.
OCCUPATIONAL DISEASE: Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies.
OCCURRENCE POLICY: Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later.
OCEAN MARINE INSURANCE: Coverage of all types of vessels and watercraft, for property damage to the vessel and cargo, including such risks as piracy and the jettisoning of cargo to save the property of others. Coverage for marine-related liabilities. War is excluded from basic policies, but can be bought back.
OPEN COMPETITION STATES: States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.
OPERATING EXPENSES: The cost of maintaining a business’s property, includes insurance, property taxes, utilities and rent, but excludes income tax, depreciation and other financing expenses.
ORDINANCE OR LAW COVERAGE: Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. For example, a building severely damaged in a hurricane may have to be elevated above the flood line when it is rebuilt. This endorsement would cover part of the additional cost.
ORDINARY LIFE INSURANCE: A life insurance policy that remains in force for the policyholder’s lifetime.
ORIGINAL EQUIPMENT MANUFACTURER PARTS / OEM: Sheet metal auto parts made by the manufacturer of the vehicle.
PACKAGE POLICY: A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.
PERIL: A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
PERSONAL ARTICLES FLOATER: A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.
PERSONAL INJURY PROTECTION COVERAGE / PIP: Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.
PERSONAL LINES: Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies.
POLICY: A written contract for insurance between an insurance company and policyholder stating details of coverage.
POLICYHOLDERS’ SURPLUS: The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.
POLLUTION INSURANCE: Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires.
PREFERRED PROVIDER ORGANIZATION: Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.
PREMISES: The particular location of the property or a portion of it as designated in an insurance policy.
PREMIUM: The price of an insurance policy, typically charged annually or semiannually.
PREMIUM TAX: A state tax on premiums paid by its residents and businesses and collected by insurers.
PREMIUMS WRITTEN: The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.
PRIOR APPROVAL STATES: States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.
PRODUCT LIABILITY: A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.
PRODUCT LIABILITY INSURANCE: Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.
PROFESSIONAL LIABILITY INSURANCE: Covers professionals for negligence and errors or omissions that injure their clients.
PROOF OF LOSS: Documents showing the insurance company that a loss occurred.
PROPERTY/CASUALTY INSURANCE: Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.
PROPERTY/CASUALTY INSURANCE CYCLE: Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.
RATE: The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.
RATE REGULATION: The process by which states monitor insurance companies’ rate changes, done either through prior approval or open competition models.
RATING AGENCIES: Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.
RATING BUREAU: The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance Services Office (ISO) which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.
REINSURANCE: Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer’s capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid.
RENTERS INSURANCE: A form of insurance that covers a policyholder’s belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides personal liability coverage for damage the policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-of-use coverage, if a policyholder must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.
REPLACEMENT COST: Insurance that pays 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.
RESERVES: A company’s best estimate of what it will pay for claims.
RESIDUAL MARKET: Facilities, such as assigned risk plans and FAIR Plans, that exist to provide coverage for those who cannot get it in the regular market. Insurers doing business in a given state generally must participate in these pools. For this reason the residual market is also known as the shared market.
RETENTION: The amount of risk retained by an insurance company that is not reinsured.
RETROSPECTIVE RATING: A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and minimum limit based on actual loss experience. It is available to large commercial insurance buyers.
RIDER: An attachment to an insurance policy that alters the policy’s coverage or terms.
RISK: The chance of loss or the person or entity that is insured.
RISK MANAGEMENT: Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.
RISK-BASED CAPITAL: The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.
SALVAGE: Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.
SCHEDULE: A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
SELF-INSURANCE: The concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in terms of paying a deductible and co-payments. Large firms often self-insure frequent, small losses such as damage to their fleet of vehicles or minor workplace injuries. However, to protect injured employees state laws set out requirements for the assumption of workers compensation programs. Self-insurance also refers to employers who assume all or part of the responsibility for paying the health insurance claims of their employees. Firms that self insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.
SEVERITY: Size of a loss. One of the criteria used in calculating premiums rates.
SOFT MARKET: An environment where insurance is plentiful and sold at a lower cost, also known as a buyers’ market.
SOLVENCY: Insurance companies’ ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure.
SPREAD OF RISK: The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood.
STACKING: 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 different policies, to add up the limit of liability available for each vehicle.
STATUTORY ACCOUNTING PRINCIPLES / SAP: More conservative standards than under GAAP accounting rules, they are imposed by state laws that emphasize the present solvency of insurance companies. SAP helps ensure that the company will have sufficient funds readily available to meet all anticipated insurance obligations by recognizing liabilities earlier or at a higher value than GAAP and assets later or at a lower value. For example, SAP requires that selling expenses be recorded immediately rather than amortized over the life of the policy.
STOCK INSURANCE COMPANY: An insurance company owned by its stockholders who share in profits through earnings distributions and increases in stock value.
STRUCTURED SETTLEMENT: Legal agreement to pay a designated person, usually someone who has been injured, a specified sum of money in periodic payments, usually for his or her lifetime, instead of in a single lump sum payment.
SUBROGATION: The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it.
SUPERFUND: A federal law enacted in 1980 to initiate cleanup of the nation’s abandoned hazardous waste dump sites and to respond to accidents that release hazardous substances into the environment. The law is officially called the Comprehensive Environmental Response, Compensation, and Liability Act.
SURETY BOND: A contract guaranteeing the performance of a specific obligation. Simply put, it is a three-party agreement under which one party, the surety company, answers to a second party, the owner, creditor or “obligee,” for a third party’s debts, default or nonperformance. Contractors are often required to purchase surety bonds if they are working on public projects. The surety company becomes responsible for carrying out the work or paying for the loss up to the bond “penalty” if the contractor fails to perform.
SURPLUS: The remainder after an insurer’s liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims.
SURPLUS LINES: Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.
TERM LIFE INSURANCE: A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable but premiums increase with age.
TERRITORIAL RATING: A method of classifying risks by geographic location to set a fair price for coverage. The location of the insured may have a considerable impact on the cost of losses. The chance of an accident or theft is much higher in an urban area than in a rural one, for example.
TERRORISM COVERAGE: Included as a part of the package in standard commercial insurance policies before September 11, 2001 virtually free of charge. Since September 11, terrorism coverage prices have increased substantially to reflect the current risk.
THIRD-PARTY COVERAGE: Liability coverage purchased by the policyholder as a protection against possible lawsuits filed by a third party. The insured and the insurer are the first and second parties to the insurance contract.
TITLE INSURANCE: Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title.
TORT: A legal term denoting a wrongful act resulting in injury or damage on which a civil court action, or legal proceeding, may be based.
TORT LAW: The body of law governing negligence, intentional interference, and other wrongful acts for which civil action can be brought, except for breach of contract, which is covered by contract law.
TORT REFORM: Refers to legislation designed to reduce liability costs through limits on various kinds of damages and through modification of liability rules.
TOTAL LOSS: The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
TRAVEL INSURANCE: Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents.
TREATY REINSURANCE: A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer’s business.
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.
UNDERINSURANCE: The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.
UNDERWRITING: Examining, accepting, or rejecting insurance risks and classifying the ones that are accepted, in order to charge appropriate premiums for them.
UNDERWRITING INCOME: The insurer’s profit on the insurance sale after all expenses and losses have been paid. When premiums aren’t sufficient to cover claims and expenses, the result is an underwriting loss. Underwriting losses are typically offset by investment income.
UNEARNED PREMIUM: The portion of a premium already received by the insurer under which protection has not yet been provided. The entire premium is not earned until the policy period expires, even though premiums are typically paid in advance.
UNINSURED MOTORISTS COVERAGE: Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.
UNIVERSAL LIFE INSURANCE: A flexible premium policy that combines protection against premature death with a type of savings vehicle, known as a cash value account, that typically earns a money market rate of interest. Death benefits can be changed during the life of the policy within limits, generally subject to a medical examination. Once funds accumulate in the cash value account, the premium can be paid at any time but the policy will lapse if there isn’t enough money to cover annual mortality charges and administrative costs.
UTILIZATION REVIEW: See Medical utilization review
VALUED POLICY: A policy under which the insurer pays a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. The money amount is not related to the extent of the loss. Life insurance policies are an example.
VANDALISM: The malicious and often random destruction or spoilage of another person’s property.
VOID: A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.
WAIVER: The surrender of a right or privilege.
WATER-DAMAGE INSURANCE COVERAGE: Protection provided in most homeowners insurance policies against sudden and accidental water damage, from burst pipes for example. Does not cover damage from problems resulting from a lack of proper maintenance such as dripping air conditioners. Water damage from floods is covered under separate flood insurance policies issued by the federal government.
WHOLE LIFE INSURANCE: The oldest kind of cash value life insurance that combines protection against premature death with a savings account. Premiums are fixed and guaranteed and remain level throughout the policy’s lifetime.
WORKERS COMPENSATION: Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws, which vary significantly, govern the amount of benefits paid and other compensation provisions.
WRAP-UP INSURANCE: Broad policy coordinated to cover liability exposures for a large group of businesses that have something in common. Might be used to insure all businesses working on a large construction project, such as an apartment complex
Credit-Based Insurance Scores Explained
Safeco, like most insurance companies, uses many factors to price your insurance. They include your driving record, claims history, the type of home or vehicle you own and, in some states, your credit-based insurance score.
What is a Credit-Based Insurance Score and Why Does it Matter?
Your credit-based insurance score is not the same as your personal credit score, nor is it a measure of your credit worthiness. The credit-based insurance score is a number that measures your likelihood of having an insurance claim. Studies have shown that consumers with higher credit-based insurance scores have fewer and less severe losses. For this reason the credit-based insurance score is useful as a rating factor, but in those states where it is used, it is only one of many that are used.
Because your personal credit history affects your credit-based insurance scores, it is important to regularly review it and make sure it’s accurate. The Fair Credit Reporting Act (FCRA) allows you to order one report for free from each of the major credit reporting agencies each year. You may also purchase a 3-in-1 report to review your scores from all three major credit bureaus—Equifax, Experian and Transunion.
Ohio Mutual’s Issuer Credit Rating Upgraded by A.M. Best
BUCYRUS, OH – Insurance rating organization A.M. Best has issued its annual rating of Ohio Mutual’s financial strength, upgrading its issuer credit rating (ICR) to “a+” after three years as “a”, and reaffirming the company’s financial strength rating (FSR) of “A” (Excellent) for the 23rd consecutive year.
The ratings include the three companies included in the OMIG intercompany pool: Ohio-domiciled Ohio Mutual Insurance Company, its wholly owned subsidiary United Ohio Insurance Company, and Maine-domiciled Casco Indemnity Company.
In sharing its rating rationale, A.M. Best states: “OMIG’s positive rating factors are derived from its moderate underwriting leverage, conservative investment risk profile, and solid regional market presence.” While recognizing the company’s weather-related risks, Best acknowledged that “despite weather-related issues, OMIG continued to produce pre-tax operating gains and positive net income in each of the past five years,” and noted that “OMIG’s five-year pre-tax returns on revenue and equity have outperformed the private passenger standard auto and homeowners composite average.”
“This increased rating from A.M. Best reflects both the financial and operational profiles of Ohio Mutual as a solid, stable company with a bright future,” said the company’s President & CEO Jim Kennedy. “As this is the final rating review under my leadership tenure, I’m particularly encouraged to see the upgraded ICR rating from A.M. Best, which is tangible acknowledgement of Ohio Mutual’s strong operating performance in recent years.”
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. More information is available at www.ambest.com.
Ohio Mutual Insurance Group, founded in 1901 and based in Bucyrus, OH, partners with nearly 400 independent agencies to distribute quality property and casualty insurance products throughout Ohio, Indiana, Maine, Vermont, New Hampshire, Connecticut, and Rhode Island. Additional company information is available at www.omig.com
At MAPFRE Insurance we build relationships based on trust. We’re committed to providing high quality products and valuable services, as well as exceptional customer experiences. That’s MAPFRE… People who take care of people.®
Then & Now
MAPFRE Insurance originated in Massachusetts as The Commerce Group, Inc. (CGI), founded in the town of Webster, Massachusetts in 1972. We are the largest private passenger automobile insurer, homeowners’ insurer and commercial automobile insurer in Massachusetts. We offer property and casualty insurance in 19 states across the United States through a network of more than 4,200 independent agents and brokers. We are rated “A” (Excellent) by A.M. Best Company.
Our company provides a full range of insurance products, including coverage for automobiles, homes, motorcycles, watercraft and businesses, as well as term life insurance. MAPFRE Insurance is part of the MAPFRE Group, an international insurer with business in 47 countries on five continents. The MAPFRE Group is the leading insurer in Spain. It is also the leading insurer in the non-life market in Latin America and the sixth largest non-life insurer in Europe.
Independent Agency Advantage
Local Home, Life, Business, & Auto Insurance Agencies
Buying insurance online in 15 minutes… does it seem too good to be true? Studies show that in most cases, it probably is. In fact, the average consumer spends four hours researching and buying insurance online. A recent study also shows that 80% of those who shopped online for insurance ended up going offline to purchase. And, over 60% of those going offline to purchase ended up buying through an agent in-person. An additional 31% purchased through a local agent over the phone. (comScore, Inc., 2011) Why go with an independent agency?
- Your agent knows the “ins and outs” of insurance. They will help you get the coverage you need and make sure you’re not paying for things you don’t.
- One phone call can get you quotes from multiple insurance companies. Independent agencies represent several different insurance companies and they can help you to find which one is the best fit and the best price for you. Why spend hours comparing companies on the internet when you can make one phone call and get quotes from multiple companies?
- Keep your business local. Get friendly service from someone who lives in your very own community. Someone you can trust.
- If you have a claim, your local agent is there to help. When the unthinkable happens, who wants to call into an 800 number and talk to a complete stranger?
- You can handle all of your insurance needs in one place. Life, Home, Car, Business and Health.
- You don’t have to pay more for all of these extra advantages!