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G | Top
GAAP reserves
Reserves that are calculated in accordance with generally accepted accounting
principles.
general account
An undivided account in which life and health insurers formerly recorded all
incoming funds. General accounts are still usually insurers' largest accounts, but
since the early 1960s, life and health insurers have begun using other accounts
as well. See also separate account.
general agent (GA)
The individual in charge of a field office of an insurer that uses the general
agency distribution system. The general agent is an independent entrepreneur
who is under contract to the insurer.
generally accepted accounting principles (GAAP)
The set of accounting principles used by most firms outside the life insurance
industry and sometimes used by life and health insurance companies. GAAP is
based on the going-concern concept of asset valuation.
GI rider
See guaranteed insurability (GI) rider.
good health provision
A provision contained in some group credit policies stating that a policy is void if
the insured was not in good health when the application was signed or when the
policy was delivered, whichever was specified in the contract.
grace period
The length of time (usually 31 days) after a premium is due and unpaid during
which the policy, including all riders, remains in force. If a premium is paid during
the grace period, the premium is considered to have been paid on time.
graded-premium whole life insurance
A type of whole life insurance in which premiums increase once or at specified
points in time, such as every three years, until a premium that remains level is
reached.
gross premium
The amount that policyowners actually pay for their insurance. The gross
premium equals the net premium plus the loading.
group creditor life insurance
Group insurance coverage wherein a master contract is issued to cover the lives
of current and future debtors of the policyowner. The beneficiary of such
coverage is the policyowner.
group deferred annuity
A type of annuity sometimes used to fund a pension plan. Employer contributions
under a group deferred annuity contract are used to purchase deferred annuities
to provide for the retirement benefits of plan participants.
group insurance
Insurance that provides coverage for several people under one contract, called a
master contract.
group ordinary life insurance
Group life insurance in which at least a part of the coverage is permanent and
builds a cash-value.
guaranteed insurability (GI) rider
An amendment to a life insurance policy that gives the policyowner the right to
purchase additional insurance of the same type as provided in the original policy.
The additional insurance can equal no more than an amount specified in the
policy contract and can be purchased at specified premium rates and at specified
times without new evidence of insurability. Also called a policy purchase rider.
guaranteed-issue insurance
Insurance coverage for which there is usually no individual underwriting. All
eligible members of a particular group of proposed insureds who apply for the
policy and who meet certain conditions are automatically issued a policy.
guaranteed renewable policy
An individual health insurance policy that specifies that the insurer will continue
the policy until the insured reaches a specified age, if premium payments are
made when due. The insurer can change premium rates for broad classes of
insureds. See also cancellable policy, conditionally renewable policy,
noncancellable and guaranteed renewable policy, noncancellable policy, and
optionally renewable policy.
guaranty association
In the insurance industry, an organization whose purpose is to protect
policyowners from losses suffered through the insolvency of an insurance
company.
H | Top
health insurance
Insurance covering medical expenses or income loss resulting from injury or
sickness. Health insurance is a general category that includes many different
types of insurance coverage, including hospital confinement insurance, hospital
expense insurance, surgical expense insurance, major medical insurance,
disability income insurance, dental expense insurance, prescription drug
insurance, and vision care insurance. See also disability income insurance and
medical expense insurance.
health maintenance organization (HMO)
An organization that provides comprehensive health care services for subscribing
members in a particular geographic area. People enrolled in an HMO pay dues in
return for the right to health care services at a lower-than-average cost. See also
group practice model (GPM) and individual practice association (IPA).
history statement
An Attending Physician's Statement concerning a specific health history admitted
by the proposed insured.
hold harmless release
A discharge stating that a payee will reimburse an insurance company if a
subsequent claimant success fully challenges the disbursement of the policy's
proceeds.
home-office-to-home-office arrangement
A manufacturer-distributor arrangement in which an insurance company that
chooses not to offer a particular product or product line agrees to act as a
brokerage general agent for certain product lines manufactured by another
insurer.
home service agents
Exclusive or captive agents who work for home service companies and who
collect premiums and provide service at the policyowner's residence. Home
service agents offer monthly debit life, health, and fire insurance products as well
as products for which premiums are billed by and remitted directly to the insurer.
Some of their business may also be in industrial insurance. They market
products primarily to middle and lower-middle income individuals and families.
See also industrial insurance and monthly debit ordinary (MDO).
home service distribution system
A distribution system which is used primarily for individual insurance products
and which employs agents who collect premiums and provide service at the
policyowner's residence. Each home service agent works within a defined
geographical territory. Home service agents offer monthly debit life, health, and
fire insurance products as well as products for which premiums are billed by and
remitted directly to the insurer. Some market industrial insurance. The home
service market is usually middle and lower-middle income individuals and
families. See also industrial insurance and monthly debit ordinary (MDO).
hospital confinement insurance.
A type of health insurance that provides a predetermined flat benefit amount for
each day an insured is hospitalized. The benefit amount does not vary according
to the amount of medical expenses the insured incurs, although some policies
provide higher benefit amounts if the insured is in an intensive or cardiac care
unit. Also called hospital indemnity insurance.
hospital-surgical expense insurance
A type of health insurance that provides benefits related directly to hospitalization
costs and associated medical expenses incurred by an insured for treatment of a
sickness or injury. Most hospital-surgical expense policies cover (a) hospital
charges for room, board, and hospital services, (b) surgeon's and physician's
fees during a hospital stay, (c) specified outpatient expenses, and (d) extended
care services, such as convalescent or nursing home costs.
hour of service
As defined by ERISA in the United States, an hour for which an employee is
entitled to be paid or is paid. An hour of service can be earned while the
employee is performing services for the employer or during a period in which no
service is performed due to vacation, holidays, illness, or other paid leaves of
absence. See also year of service.
I | Top
illness perils
A classification used by health insurance underwriters to evaluate the type and
degree of peril represented by a particular occupation. Illness perils include
exposure to dust, poisons, and extreme temperatures. See also accident perils.
immediate annuity
An annuity under which income payments begin one period after the annuity is
purchased.
immediate participation guarantee (IPG) contract
Similar to a deposit administration contract except that an IPG contract does not
fully protect the plan sponsor against investment loss, nor does the IPG contract
guarantee minimum investment returns. See also deposit administration contract.
impairment
Any aspect of the health, occupation, activities, or life-style of a proposed insured
that could increase his or her expected mortality or morbidity.
impairment rider
An attachment to a health insurance policy that excludes or limits coverage for a
specific health impairment. Also called an exclusion rider or impairment waiver.
implied authority
The authority that a principal intends an agent to have and that arises incidentally
from an express grant of authority. See agent and principal. Compare to
apparent authority and express authority.
incentive coinsurance provisions
Provisions included in some dental policies that promote regular dental care by
specifying that insurers will pay a higher percentage of dental expenses if the
insured receives regular dental examinations.
incident of ownership
Any policy right including the right to (1) change the beneficiary, (2) cancel or
surrender the policy, (3) assign the policy, (4) obtain a policy loan, or (5) use the
policy as collateral for a loan.
income protection insurance policy
A type of disability income policy which specifies that an insured is disabled if
that person suffers an income loss caused by a disability.
income replacement benefit
See recovery benefit.
income replacement ratio
The percentage of preretirement income that a retiree would need to receive
after retirement in order to have a postretirement standard of living equivalent to
his or her preretirement standard of living. This ratio is generally less than 100
percent, because some of an individual's expenses (i.e., taxes, commuting costs,
clothing expenditures, savings needs) decrease after retirement. Also known as
the replacement ratio.
incontestable clause
Life insurance policy clause that provides a time limit (usually two years) on the
insurer's right to dispute a policy's validity based on material misstatements
made in the application. See also contestable period.
increasing term insurance
A type of term insurance in which the death benefit of the policy increases during
the term of coverage. The death benefit may increase at stated intervals by some
specified amount or percentage, or it may increase according to increases in the
cost of living.
indemnity
See contract of indemnity.
independent life brokers
Licensed brokers who operate independently and specialize in selling particular
types of products or in meeting the business coverage or estate planning needs
of certain target markets.
independent marketing organization (IMO)
A non-company affiliated organization that contracts with an insurance company
to perform distribution and other marketing functions for one or more of the
company's products or product lines.
independent property/casualty (P/C) brokers
Independent, multiple-line agents or agencies that are primarily engaged in the
distribution of property/casualty products and that make up what is commonly
known in the property/casualty insurance industry as the independent agency
system or the American Agency System.
indeterminate premium life insurance
A type of nonparticipating whole life insurance that specifies both a maximum
potential premium rate and a lower premium rate. The lower rate is paid by the
policyowner for a specified period (from 1 to 10 years) immediately after the
policy is purchased. Later, the premium rate may fluctuate according to the
investment earnings of the insurance company, but the premium rate will never
be larger than the maximum premium rate. Also called flexible premium life
insurance, nonguaranteed premium life insurance, and variable premium life
insurance.
indexation
In pension planning, the adjustment of postretirement benefits to compensate for
the effects of inflation. Benefits are generally indexed to increase in accordance
with an increase in the level of a price index such as the Consumer Price Index
(CPI). See also cost-of-living adjustment (COLA).
indexed life insurance
A whole life plan of insurance that provides for the death benefit of the policy
and, consequently, the premium rate to increase automatically every year in
accordance with any increase in the Consumer Price Index (CPI).
individual account plan
A pension plan funded according to a defined contribution formula. Each
participant's benefits are based on the amount contained in that individual's
account. See defined contribution formula and defined contribution pension plan.
individual employer groups
A group insurance market segment composed of single employers providing
coverage for employees through a policy—the master contract—issued to the
employer.
individual fraud
A type of medical insurance fraud committed by individuals on their medical
expense claims in order to obtain benefits in excess of their medical expenses.
Contrast with provider fraud.
individual funding methods
Pension plan funding methods in which the amount of contributions necessary to
fund a plan is determined by first separately calculating the contributions for each
of the plan's participants and then adding these amounts to arrive at the total
required contribution for the plan. Contrast with aggregate funding methods.
individual insurance
Insurance that is issued to an individual person, as contrasted with group
insurance. Also called ordinary insurance. See also ordinary life insurance.
individual practice association (IPA)
A means of organizing a health maintenance organization (HMO) in which the
participating physicians maintain their own separate offices. Such physicians
usually treat both private patients and HMO members. See also group practice
model (GPM).
individual retirement account (IRA)
In the United States, a tax-sheltered savings plan that allows some citizens to
make pre-tax contributions to an approved account. The contributions and
investment earnings are taxable as income only when paid out. Investors can
establish IRAs through a number of financial institutions, including insurance
companies. See also Keogh Act and simplified employee pension (SEP).
industrial insurance
A form of life insurance which today accounts for a small percentage of the
business sold through the home service distribution system but a considerable
percentage of the insurance in force. It is characterized by (a) death benefits of
$2,000 or less, (b) a weekly, biweekly, or monthly premium payment schedule,
(c) the collection of premiums at the policyowner's residence by an agent, and (d)
minimum underwriting requirements. See also home service distribution system.
in-house brokerage agency
A department established by an exclusive-agent company and staffed by
company-employed brokerage sales people whose primary function is to solicit
distribution agreements with other companies offering products that the
exclusive-agent company itself does not manufacture. The company's agents
can then broker business with those companies through the in-house brokerage
agency.
initial deductible
See deductible.
initial premium
The first premium payable for an insurance contract.
initial reserve
The reserve on a policy at the beginning of any given policy year. The initial
reserve includes the net annual premium then due.
inside build-up
See cash value.
insolvency clause
In the United States, a clause contained in most reinsurance contracts and
required by most states which specifies that, if the ceding company becomes
insolvent, the reinsurer must pay the ceding company or its liquidator all
reinsurance which comes payable, without reduction, even if the ceding company
or its liquidator has failed to pay all or a portion of any claim.
inspection receipt
A receipt given to the applicant when the applicant receives a policy for
inspection. This inspection receipt states that the insurance is not in effect and
that there has been no delivery of the policy in the legal sense.
inspection report
A report made by a consumer reporting agency concerning a proposed insured's
lifestyle, occupation, and economic standing. An inspection report is considered
an investigative consumer report, as defined by the Fair Credit Reporting Act.
See also investigative consumer report.
installation
The term used to include all the activities from the time a prospect decides to
purchase a group insurance policy to the time the master contract and its
individual certificates are issued.
installment certificate
A certificate issued to the beneficiary of a life insurance policy that specifies the
amount of each benefit payment and/or the period during which benefit payments
will be made under a settlement option. An installment certificate also specifies
whether a beneficiary is allowed to withdraw all or part of the funds during the
payment period. See also settlement agreement and settlement options.
installment refund option
A form of life income option with refund which specifies that any proceeds
remaining after the death of the beneficiary will be paid in installments to the
contingent payee. Contrast with the cash refund option.
insurability provision
An insurance provision stipulating that, for a policy to become effective, the
insured must still be insurable at the time of policy delivery according to the
underwriting rules and practices of the company.
insurability statement
A questionnaire that an insurer may ask an applicant to complete when a
considerable amount of time has elapsed between the time the application is
received and the time the policy is actually issued. The purpose of the insurability
statement is to determine if any insurability factors have changed since the
original application was completed. Insurability statements help protect insurers
from post-issue antiselection. See also antiselection.
insurability type temporary insurance agreement
An agreement issued in conjunction with a conditional premium receipt that
provides temporary life insurance coverage as of the date specified in the
agreement on the condition that the proposed insured is insurable. See also
conditional premium receipts and temporary insurance agreements. Compare to
approval type temporary insurance agreement.
insurable interest
A condition in which the person applying for an insurance policy and the person
who is to receive the policy benefit will suffer an emotional or financial loss if the
event insured against occurs. Without the presence of insurable interest, an
insurance contract is not formed for a lawful purpose and, thus, is void from the
start.
insurance
A system of protection against loss in which a number of individuals agree to pay
certain sums of money, called premiums, to create a pool of money which will
guarantee that the individuals will be compensated for losses caused by events
such as fire, accident, illness, or death.
insurance agent
A representative of an insurance company who sells insurance. An insurance
agent locates prospective insurance customers, determines the insurance needs
of each customer, and assists the customer in applying for insurance. Typically,
an insurance agent will deliver the policy when the application is approved, will
collect the initial premium, and will provide customer service to policyowners.
Also called an agent, a field underwriter, or a life underwriter. See also broker,
detached agent, general agent (GA), personal producing general agent (PPGA),
and soliciting agent.
Insurance Regulatory Information System (IRIS)
In the United States, an information system developed by the NAIC to help state
regulatory agencies assess the financial stability of individual insurance
companies by means of a series of ratios derived from the companies' statutory
annual statements.
insurance trust
A common form of trust, created during the lifetime of the person who creates the
trust, that is funded by insurance policies on the life of the trust's creator or by the
proceeds of such policies.
insured funding
A method of funding a pension plan in which the plan sponsor purchases annuity
or life insurance contracts on behalf of each participant. The insurance company
guarantees a certain benefit to each retiree. See also group deferred annuity.
insurer
The party in an insurance contract that promises to pay a benefit if a specified
loss occurs. Usually an insurance company.
insurer-administered group insurance plan
A group insurance plan for which the insurer performs the administrative work.
This administrative work includes computing the amounts of the premiums due
and mailing premium notices to the policyholder, usually monthly.
integrated deductible
A type of deductible included in some major medical expense plans that can be
satisfied by amounts paid by the insured under basic medical expense plans.
Contrast with corridor deductible.
integrated dental plan
A dental plan which is part of a major medical policy.
integrated pension plan
A private pension plan in which the benefits or contributions are coordinated with
the benefits or contributions of a government-sponsored pension plan.
interest-adjusted cost
One figure calculated under the interest-adjusted net cost (IANC) method of
comparing the costs of life insurance policies. The interest-adjusted cost
represents the average annual cost of a policy and is calculated using premiums,
dividends, and cash values. Also called the surrender cost index (SCI).
interest-adjusted net cost (IANC) method
A method of comparing the costs of life insurance policies. The IANC method
weights dividends and cash values according to how far into the future the
various amounts are payable. Under this method, three amounts are calculated:
the interest-adjusted cost, the interest-adjusted payment, and the equivalent level
annual dividend. Also known as the surrender cost index (SCI) method. See also
cost comparison methods.
interest-adjusted payment
One figure calculated under the interest-adjusted net cost method of comparing
the costs of life insurance policies. The interest-adjusted payment represents the
average annual payment for the policy and is calculated using only premiums
and dividends. Also called the net payment cost index.
interest option
A life insurance settlement option under which the proceeds of a policy are
temporarily left on deposit with the insurer and the money earned on those
proceeds is paid annually, semiannually, quarterly, or monthly to the beneficiary
or other payee.
internal replacement
The surrender of one life insurance policy in order to buy another insurance
policy that is issued by the same insurer.
interpleader
A method for settling a claim under which the insurer pays the policy proceeds to
a court, stating that the company cannot determine the correct party to whom the
proceeds should be paid, and asks the court to decide the proper recipient.
investigative consumer report
As defined by the Fair Credit Reporting Act, a consumer report that uses
interviews with persons who are associated with, or who have knowledge of, the
consumer in question in order to solicit information regarding the consumer's
character, mode of living, or general reputation. See also inspection report.
investment-sensitive insurance
A general category of insurance products in which the death benefit and the cash
value vary according to the insurer's investment earnings. In investment-sensitive
insurance products, policyowners share a portion of the insurer's investment risk.
The exact benefit amounts for these policies cannot be computed in advance,
beyond any guaranteed minimums. The specific products that make up this
category of insurance include variable annuities, variable life insurance, and
variable universal life insurance. Also called interest-sensitive insurance.
investment year method (IYM)
An accounting method in which an insurer keeps records of the interest rates it
earns annually on funds assigned each year to accounts within the general
account. Also called the new money method. Compare to the portfolio method.
involuntary plan termination
The curtailment of a pension plan initiated by a government organization, such as
the Pension Benefit Guaranty Corporation (PBGC) in the United States, rather
than by the plan sponsor. Contrast with voluntary plan termination. See also
distress termination and standard plan termination.
IPA
See individual practice association (IPA).
IRA
See individual retirement account (IRA).
irrevocable beneficiary
A beneficiary whose rights to the proceeds of a life insurance policy cannot be
cancelled by the policyowner unless the beneficiary consents. See also
beneficiary.
issuing bank
A mutual savings bank that sells and issues life insurance policies in its own
name. Each issuing bank issues its own contracts, keeps its own records, and
invests the assets of its own insurance department. See also agency bank and
savings bank life insurance (SBLI).
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