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Glossary

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Accelerated Benefits Rider

A life insurance rider that allows for the early payment of some portion of the policy’s face amount should the insured suffer from a terminal illness or injury.

Accidental Death and Dismemberment

Insurance providing payment if the insured’s death results from an accident, if the insured accidentally severs a limb above the wrist or ankle joints, or if the insured irreversibly loses his or her eyesight.

Accidental Death Benefit Rider

A life insurance policy rider providing for payment of an additional benefit related to the face amount of the base policy when death occurs by accidental means.

Actual Cash Value

An amount equivalent to the fair market value of the stolen or damaged property immediately preceding the loss. For real property, this amount can be based on a determination of the fair market value of the property before and after the loss. For vehicles, this amount can be determined by local area private party sales and dealer quotations for comparable vehicles.

Admitted Company

An insurance company authorized to do business in California.

Agent

A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.

Aircraft Insurance

Coverage for the insured in the event that the insured’s negligent acts and/or omissions result in losses in connection with the use, ownership, or maintenance of aircraft.

Annually Renewable Term

A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability. Also called Yearly Renewable Term (YRT).

Automobile Insurance

Coverage on the risks associated with driving or owning an automobile. It can include collision, liability, comprehensive, medical, and uninsured motorist coverage.

Beneficiary

Person to whom the proceeds of a life policy are payable when the insured dies. The various types of beneficiaries are: primary beneficiaries (those first entitled to proceeds); secondary beneficiaries (those entitled to proceeds if no primary beneficiary is living when the insured dies); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are alive when the insured dies).

Best’s Insurance Report

A guide, published by A. M. Best, Inc., that rates insurers’ financial integrity and managerial and operational strengths.

Binder

A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.

Bodily Injury

Any physical injury to a person. The purpose of liability insurance is to cover bodily injury to a third party resulting from the negligent or unintentional acts of an insured.

Boiler and Machinery Insurance

Covers losses resulting from the malfunction of boilers and machinery. This coverage is usually excluded from property insurance creating the need for this separate product.

Broker

A licensed person or organization paid by you to look for insurance on your behalf.

Burglary

Coverage against loss as a result of forced entry into premises.

Cancellation

The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.

Claim

Notice to an insurer that under the terms of a policy, a loss maybe covered.

Claimant

The first or third party. That is any person who asserts right of recovery.

Collision (Auto)

Reimburses you for damage to your automobile sustained in a collision with another car or with any other object, movable or fixed, (for example, you accidentally backed into another object while pulling out from a parking stall and causing damage to the bumper and fender of your covered automobile).

Collision Deductive Waiver

This coverage waves your collision deductible if you are hit by an negligent uninsured motorist.

Common Carrier Liability

Coverage for transportation firms that must carry any customer’s goods so long as the customer is willing to pay. Examples include trucking companies, bus lines, and airlines.

Comprehensive (Auto)

Provides coverage for any direct and accidental loss of, or damage to, your covered automobile and its normal equipment, to include but not limited to fire, theft or malicious mischief.

Comprehensive Glass Insurance

Coverage on an “all risks” basis for glass breakage, subject to exclusions of war and fire.

Conditional Receipt

Given to policy owners when they pay a premium at the time of application. Interim coverage during the underwriting process is provided subject to terms and conditions of the receipt.

Contingent Beneficiary

Person or persons named to receive proceeds in case the original beneficiary is not alive. Also referred to as a secondary or tertiary beneficiary.

Conversion Privilege

Allows the policy-owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Convertible Term

Contract that may be converted to a permanent form of insurance without medical examination.

Credit Life Insurance

Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.

Customer Service Rating

This is a composite score based on complaint ratios across seven sample states

Decline

The company refuses to accept the request for insurance coverage.

Deductible

The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.

Decreasing Term Insurance

Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually monthly or annually.

Depreciation

A decrease in value due to age, wear and tear, etc.

Disability Income Rider

A type of health insurance coverage, it provides for the payment of regular, periodic income should the insured become disabled from illness or injury.

Endorsement

Amendment to the policy used to add or delete coverage. Also referred to as a “rider.”

Exclusion

Certain causes and conditions, listed in the policy, which are not covered.

Expiration Date

The date on which the policy ends.

Face Amount

The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.

Financial Guarantee Insurance

A surety bond, insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee.

Financial Strength Rating

This score is an assessment of the insurer’s ability to meet its financial obligations [i.e. pay claims to policyholders]

Fire Insurance

Coverage for loss of or damage to a building and/or contents due to fire.

Good Driver Discount

To be eligible for the Good Drivers Discount all operators of the insured vehicles must have been licensed for three or more year, have no more than a one (1) point charge on their driving record and has not been determined “at fault” in an accident resulting in bodily injury or death to any person.

Grace Period

A specified period immediately following the premium due date during which a payment can be made to continue a policy in force without interruption. This applies only to Life and Health policies. Check your policy to be sure that a grace period is offered and how many days, if any, are allowed.

Guaranteed Insurability

An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.

Health Insurance

A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.

Homeowner Insurance

An elective combination of coverage for the risks of owning a home. Can include losses due to fire, burglary, vandalism, earthquake, and other perils.

IMSA Member

IMSA is the Insurance Marketplace Standards Association, which promotes ethical standards in the sale and service of individually-sold life insurance, annuity, and long-term care products

Incontestable Clause

A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years.

Increasing Term Insurance

Term life insurance in which the death benefit increases periodically over the policy’s term. Usually purchased as a cost of living rider to a whole life policy.

Index Life

Index % of Premium Fees
The percentage of your premium that is put towards fees [administrative, fund management, etc.]

Index Death Benefit Options

These are the policy options related to the death benefit [the money that is paid when the insured passes away]

Index Maximum Age

This is the maximum age that the insured can be at the time life insurance coverage begins

Index Minimum Age

This is the minimum age that the insured can be at the time life insurance coverage begins

Index Minimum Death Benefit

The minimum coverage that the company will write for

Index Number of Investments

This is the number of indices [such as the S&P 500 Index, Dow Jones Industrial Average, etc.] that the account will track

Index Policy Available Riders

Life insurance riders are modifications to the policy made at the same time it is issued. Riders change the basic policy to provide additional features for the person being insured

Index Premium Options

These are the policy options related to the premium [the money that is paid by the insured in exchange for coverage]

Index Upfront Fees

Fees required to start a new policy

Insurance Company Ratings

There are five major insurance industry ratings services; A. M. Best, Standard & Poor’s, Moody’s, Fitch, and Weiss. These services provide information on insurance company financial performance, stability, claims paying ability, and more. The top ratings are: A. M. Best= A++, Standard & Poor’s=AAA, Moody’s=AAA, Fitch=AAA, Weiss=A+. Generally, IntelliQuote Insurance Services recommends companies that carry at least an A+ rating from A. M. Best. Occasionally, an A- rated company may be quoted if price and company performance justifies the selection.

Insured

The policyholder – the person(s) protected in case of a loss or claim.

Insurer

The insurance company.

Legal Insurance

Prepaid legal insurance coverage plan sold on a group basis.

Level Term Insurance

Term coverage on which the face value and premiums remain unchanged from the date the policy comes into force to the date the policy expires.

Liability (Auto)

Coverage for a policyholder’s legal liability resulting from injuries to other persons or damage to their property as a result of an auto accident.

Liability Insurance

Coverage for all sums that the insured becomes legally obligated to pay because of bodily injury or property damage, and sometimes other wrongs, to which an insurance policy applies.

Life Insurance

A policy that will pay a specified sum to beneficiaries upon the death of the insured.

Limit

Maximum amount a policy will pay either overall or under a particular coverage.

Loan Value

The amount which can be borrowed at a specified rate of interest from the issuing company by the policyholder, using the value of the policy as collateral. In the event the policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus any interest is deducted from the amount payable.

Marine Insurance

Coverage for goods in transit and the vehicles of transportation on waterways, land, and air.

Material Misrepresentation

The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.

Medical Examination

Typically, the medical examination is conducted by a licensed paramedical professional. The medical report is part of the application process, becomes part of the policy contract, and is attached to the policy. A “non-medical” is a short-form medical report filled out by the life insurance agent. Various company rules, such as amount of insurance applied for or already in force; applicant’s age, sex, past physical history; data revealed by inspection report, etc., determine whether the application will be accepted on a “medical” or “non-medical.” basis.

Medical Payments

Will pay reasonable expenses incurred for necessary medical and /or funeral services because of bodily injury caused by accident and sustained by you or any other person while occupying a covered automobile.

Miscellaneous Insurance

Includes insurance against loss from damage done, directly or indirectly by lightning, windstorm, tornado, earthquake or insurance under an open policy indemnifying the producer of any motion picture, television, theatrical, sport, or similar production, event, or exhibition against loss by reason of the interruption, postponement, or cancellation of such production, event, or exhibition due to death, accidental injury, or sickness preventing performers, directors, or other principals from commencing or continuing their respective performance or duties; and any insurance not included in any other classes and which is a proper subject of insurance (California Insurance Code, Section 120).

Misquote

An incorrect estimate of the insurance premium.

Mortgage Insurance

Life insurance that pays the balance of a mortgage if the mortgagor (insured) dies.

NAIC Market Share

The National Association of Insurance Commissioners national market share report from 2010

Other Insured Rider

A term rider covering an eligible family member or business member other than the insured that is attached to the base policy covering the insured.

Peril

The cause of a possible loss. For example, fire, theft, or hail.

Policy

The written contract of insurance.

Policy Limit

The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Types

These are the various policies that are offered by the provider

Preferred Risk

A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age. (See Standard Risk.)

Premium

The periodic payment required to keep an insurance policy in force.

Premium Financing

A policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Primary Beneficiary

The beneficiary designated by the insured as the first to receive the policy benefits.

Proceeds

Net amount of money payable by the company at the insured’s death or at policy maturity.

Pro-Rata Cancellation

When the policy is terminated midterm by the insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is canceled after 40 days of coverage at the company’s election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.

Property Damage

Damage to another person’s property. The purpose of liability insurance is to cover property damage to a third party resulting from the negligent or intentional acts of an insured.

Quote

An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

Replacement Value/span>

The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.

Reinstatement/span>

The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.

Rider

Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy’s conditions are expanded and additional coverage is added, or a coverage or condition is waived.

Secondary Beneficiary

An alternate beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.

Short-Rate Cancellation

When the policy is terminated prior to the expiration date at the policyholder’s request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish its own short-rate schedule.

Smoker Ratings

Insurers will give a lower premium rate to consumers who do not smoke or use tobacco. If you have smoked in the past, most carriers will consider you a non-smoker, if you have not smoked for one year prior to applying for coverage. Consumers should be aware that nicotine can be detected in a variety of routine screenings tests that are now commonly required by most insurance companies.

Smart Rating

The smart rating is a weighted average of the financial strength score, the customer service score, and the term policy value score

Solicitor

A licensed employee of a fire and casualty agent or broker who may act for the agent or broker in some circumstances.

Sprinkler Insurance

Coverage for property damage caused by untimely discharge from an automatic sprinkler system.

Standard Risk

A person who, according to a company’s underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

Sub-Standard Risk

A person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Suicide Clause

Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years, after the issue date, the company’s liability will be limited to a return of premiums paid.

Surcharge

An extra charge applied by the insurer. For automobile insurance, a surcharge is usually for accidents or moving violations.

Surrender

To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the non-forfeiture options at the time of surrender.

Team and Vehicle Insurance

Includes insurance against loss through damage or legal liability for damage, to property caused by the use of teams or vehicles other than ships, boats, or railroad rolling stock, whether by accident or collision or by explosion of engine, tank, boiler, pipe, or tire of the vehicle, and insurance against the theft of the whole or part of such vehicle (California Insurance Code, Section 115).

Term Life Insurance (Term Insurance)

Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to 20 years, because such periods usually cover the needs for temporary protection.

Term of Policy

Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance.

Term Death Benefit Options

These are the policy options related to the death benefit [the money that is paid when the insured passes away]

Term Maximum Age

This is the maximum age that the insured can be at the time life insurance coverage begins

Term Minimum Age

This is the minimum age that the insured can be at the time life insurance coverage begins

Term Minimum Death Benefit

The minimum coverage that the company will write for

Term Policy Available Riders

Life insurance riders are modifications to the policy made at the same time it is issued. Riders change the basic policy to provide additional features for the person being insured

Term Policy Standard Features

Standard feature available with the service

Term Policy Value Score

This is a composite score based on sample term policy premiums across four different policyholder profiles

Title Insurance

Coverage for losses if a land title is not free and clear of defects that were unknown when the title insurance was written.

Underwriter

Company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, company employee who decides whether the company should assume a particular risk; or the agent who sells the policy.

Underwriting

The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Uninsurable Risk

Individual not acceptable for insurance due to excessive risk.

Uninsured Motorist Bodily Injury

Will pay you and your passengers for bodily injury cause by a negligent uninsured motorist, a hit-and-run driver, or by a driver whose insurer is insolvent.

Universal Life

Universal % of Premium Fees. The percentage of your premium that is put towards fees [administrative, fund management, etc.]

Universal Death Benefit Options

These are the policy options related to the death benefit [the money that is paid when the insured passes away]

Universal Maximum Age

This is the maximum age that the insured can be at the time life insurance coverage begins

Universal Minimum Death Benefit

The minimum coverage that the company will write for

Universal Policy Available Riders

Life insurance riders are modifications to the policy made at the same time it is issued

Universal Premium Options

These are the policy options related to the premium [the money that is paid by the insured in exchange for coverage

Universal Upfront Fees

Fees required to start a new policy

Variable % of Premium Fees

The percentage of your premium that is put towards fees [administrative, fund management, etc.]

Variable Maximum Age

This is the maximum age that the insured can be at the time life insurance coverage begins

Variable Minimum Death Benefit

The minimum coverage that the company will write for

Variable Policy Available Riders

Life insurance riders are modifications to the policy made at the same time it is issued. Riders change the basic policy to provide additional features for the person being insured

Variable Premium Options

These are the policy options related to the premium [the money that is paid by the insured in exchange for coverage]

Variable Upfront Fees

Fees required to start a new policy

Waiting Period

A period of time set forth in a policy which must pass before some or all coverage begin.

Waiver of Premium

Rider or provision included in most life insurance policies exempting the insured from paying premiums after insured has been disabled for a specified period of time, usually six months.

Whole Life Insurance

Whole Life Insurance is also known as Ordinary, Standard or Permanent life insurance. Unlike term insurance, whole life insurance provides insurance coverage for the lifetime of the insured. Whole life insurance policies also provide tax-deferred buildup of cash value, payable upon surrender or payment default. Generally, permanent insurance has fixed premiums and death benefits. Other types of permanent coverage, such as Graded Premium Life, Universal Life, and Variable Life, offer variable premiums and death benefits.

What is Life Insurance?

Life insurance is a contract between a policy holder and an a insurer in which the insurer agrees to pay a designated beneficiary a sum of money [also known as the ‘benefit’] when the insured person dies

Whole Death Benefit Options

These are the policy options related to the death benefit [the money that is paid when the insured passes away]

Whole Dividend Options

Dividends are a return of premiums (different from the interest earned from the savings account) distributed to policyholders if the insurance company does well financially. They are not guaranteed

Whole Minimum Age

This is the minimum age that the insured can be at the time life insurance coverage begins

Whole Minimum Death Benefit

The minimum coverage that the company will write for

Whole Policy Available Riders

Life insurance riders are modifications to the policy made at the same time it is issued. Riders change the basic policy to provide additional features for the person being insured

Whole Premium Options

These are the policy options related to the premium [the money that is paid by the insured in exchange for coverage]

Whole Upfront Fees

Fees required to start a new policy

Workers Compensation Insurance

Coverage providing four types of benefits (medical care, death, disability, and rehabilitation) for employee job-related injuries or diseases as a matter of right (without regard to fault).

Insurance Terms Used in the Area of Sureties and Bonds

Arrestee

A person in custody whose release may be secured by posting bail.

Bailee

A person or concern having possession of property committed in trust from the owner.

Bid Bond

A guarantee that the contractor will enter into a contract, if it is awarded to him, and furnish such contract bond (sometimes called “performance bond”) as is required by terms thereof.

Court Bonds

All bonds and undertakings required of litigants to enable them to pursue certain remedies of the courts.

Effective Date

The date on which an insurance policy or bond goes into effect, and from which protection is furnished.

Fidelity Bond

An obligation of the insurance company against financial loss caused by the dishonest acts of employees.

Judicial Bond

A bond required in civil and criminal court actions.

Named Schedule Bond

A fidelity bond providing coverage for persons listed or scheduled on the bond.

Obligee

Broadly, anyone in whose favor an obligation runs. Frequently used in surety bonds, this refers to the person, firm or corporation protected by the bond.

Obligor

Commonly called “principal,” one bound by an obligation. Under a bond, strictly speaking, both the principal and the surety are obligers.

Power of Attorney

Authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power.

Principal

A person or organization whose obligation are guaranteed by a bond.

Surety

An arrangement whereby one party becomes answerable to a third party for the acts of a second party. Customarily an insurance company, the party in a suretyship arrangement who holds himself responsible to one person for the acts of another.

Surety Bond

A bond which the surety agrees to answer to the obligee for the non-performance of the principal (also known as the obligor).

Suretyship

Stated in its simplest terms, suretyship embraces all forms of obligation to pay debts or answer for the default of another.

Insurance Terms Used in the Area of Residential Title Insurance

Thank you for choosing to learn more about Residential Title Insurance.

Title insurance provides coverage for losses that occur when a land title is not free and clear of defects (e.g. claims and defects that were unknown when the title insurance was written). Two types of title insurance policies are common, a lender’s policy and an owner’s policy.

Lender’s Policy

When you take out a mortgage, the lender seeks protection for their investment by requiring lender’s title insurance against losses resulting from claims made by others against your new home. This policy does not protect you nor does the seller’s title insurance policy protect you.

Owner’s Policy

Since a lender’s policy does not protect your financial interests, an owner’s title insurance policy is worth serious consideration. If someone has a claim against your new home and you are not insured, the result could be financial disaster. Many insurers offer discounts when both the lender and owner policies are purchased at the same time.

Choice of Title Insurer

Per the Real Estate Settlement Procedures Act (RESPA) of 1974 (Public Law 93-533), a seller cannot require you to purchase title insurance from any particular company. This survey should be used as you shop for both types of title insurance and be sure that any company you select meets your standards and those of your lender.

Please visit the Federal Department of Housing and Urban Development (HUD) for additional information on RESPA and title insurance.

Escrow

California Financial Code Section 17003 defines escrow as “any transaction wherein one person for the purpose of affecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property or any other thing of value to a third person to be held by such third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such third person to a grantee, grantor, promisee, promissor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.”

Title insurance issues are normally part of this escrow process and are handled differently in Northern and Southern California. In Northern California, title insurance companies tend to handle all title and escrow services in the same transaction. In Southern California, the title and escrow transactions are separate with escrow being provided by banks, escrow companies, or title companies. Practices will vary from county to county so be sure you understand the dynamics of your individual transaction(s).

Title Homeowners Fee

The fee paid for the portion of the title insurance policy that protects the buyer of the home for a purchase. Not applicable in case of refinance.

Title Lenders Fee

The fee paid for the portion of the title insurance policy that protects the lender for purchase.

Escrow Sale Fee

The fee paid for the escrow for a purchase. Not applicable in case of refinance.

Escrow Loan Fee

For a sale or purchase, the fee paid is a loan tie-in fee if required by the escrow company. For a refinance, the fee paid is for the escrow of a refinance.

Insurance Products

Life Insurance
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