Insurance Glossary - Understanding Common Terms
Our glossary is divided alphabetically by
insurance term in a quick reference guide to assist understanding the language commonly used by insurance companies. Policy documents contain a number of these terms because they typically define
the limitations of risk and liability on the insured and any exclusions of coverage.
If you plan to start a new policy or renew your current policy with a different
carrier or agency, it is important to review and understand the policy differences
behind individual quotes from multiple carriers. Lower policy
premiums may be the result of decreased payout benefits, higher deductibles, or maximum
damages allowed. It is important to identify these unique features in any
policy comparison, otherwise a lower price may come at a much higher cost when
you have to file a claim for loss or damages in the future.
Select the first letter of the word or term to locate a definition and brief description.
For example, to get help with the terms "Automobile Liability Insurance" or "Premium", select either the letter A or P from the menu bar below:
Insurance Glossary: Terms that Begin with the Letter 'r'
- The pricing factor upon which the insurance buyer's premium is based.
- An insurance policy issued at a higher-than-standard premium rate to cover a higher-than-standard risk; for example, an insured who has impaired health or a hazardous occupation.
- The statistical process by which insurers determine probability of loss and pricing for the basic classes of insurance.
- A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.
Reasonable and Customary Charge
- A charge for health care which is consistent with the going rate or charge in a certain geographical area for identical or similar services.
- Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is illegal.
Recurring Claim Provision
- A provision in some health insurance policies which specifies a length of time during which the recurrence of a condition is considered to be a continuation of a previous period of disability or hospital confinement.
- A provision in some health insurance policies, which specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.
Reduced Paid-up Insurance
- A form of insurance available as a nonforfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount. The policy cash surrender value is used to purchase whole life insurance. No additional premiums are required to maintain the reduced death benefit amount under this reduced paid up whole life policy.
- Supervision of business practices by a governmental entity. Regulation of insurance companies is through respective state insurance commissioners.
- (1) Restoration of a totally disabled person to a meaningful occupation, (2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.
- The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.
- The resumption of coverage under a policy which has lapsed.
- The acceptance by one or more insurers, called reinsurers, of a portion of the risk accepted by another insurer who has contracted for the entire coverage. Reinsurance can be treaty or facultative.
- An alternative mechanism to service those insureds that cannot obtain insurance in the voluntary market. Premiums and losses for the business that is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market. See also Residual Market.
Renewable Term Insurance
- Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.
- Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.
- A form of business interruption insurance for a landlord, designed to protect building owners against loss of income when rentals have been interrupted or rental value has been impaired by the occurrence of any of the insured perils. It assures continuous income while an insured's building is untenantable.
- A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.
- The substitution of health insurance coverage from one policy contract to another.
- The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. Contrast Actual Cash Value.
Replacement Cost Insurance
- Insurance designed to provide coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy. No deduction is taken for depreciation in arriving at the proper amount of insurance needed to comply with the coinsurance clause.
- The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.
- Statements made by an applicant in an insurance application, which he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.
- Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses clause set forth in the policy, but takes effect as of the effective date of the policy, thus voiding the contract from its inception.
Reservation of Rights
- An arrangement whereby an insurer defends a case without commitment to provide coverage in the event that the facts disclosed during the trial reveal that the occurrence is not covered.
- (1) An amount representing an insurer's estimate of its liabilities on future commitments under policies outstanding. (2) An amount allocated for a special purpose.
- A period of partial disability that immediately follows a period of total disability. Benefits for residual disability are paid on a pro-rata basis, depending on the percentage of earnings loss.
Residual Disability Benefits
- A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.
- A source of insurance available to applicants who are unable to obtain insurance through ordinary methods in the voluntary market. See Automobile Insurance Plan, Joint Underwriting Association.
- The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
- See Earnings Test.
- The process by which a reinsurer obtains reinsurance from another company.
- The first date for which claims will be paid under a claims-made policy of liability insurance.
- Rating procedure which allows adjustment of an insured's final rate on the basis of the insured's own loss experience.
- A trust that can be terminated or revoked by its creator.
- A document that modifies an insurance policy. It may increase or decrease benefits, waive a condition or coverage, or in any other way amend the original contract. See Endorsement.
Right of Survivorship
- Legal rule which states that at the death of one co-owner of property, that person's interest in the property automatically passes to the surviving joint tenant or tenants.
- (1) The chance of loss; (2) The insured or property covered by a policy or application.
- The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. See also Underwriting.
- Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.
Risk Retention Group
- An alternative form of insurance in which members of a similar profession or business band together to self insure their risks.
- The taking of property from a person by force or threat of violence.
- Transfer of IRA or other qualified pension funds from one financial institution to another.
Don't see an insurance term listed here? Ask Customer Service