Glossary
of Insurance Terms
DECLARATION
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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.”
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DEDUCTIBLE
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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.
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DEFINED BENEFIT PLAN
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A retirement
plan under which pension benefits are fixed in advance by a formula
based generally on years of service to the company multiplied
by a specific percentage of wages, usually average earnings over
that period or highest average earnings over the final years with
the company.
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DEFINED CONTRIBUTION PLAN
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An employee
benefit plan under which the employer sets up benefit accounts
and contributions are made to it by the employer and by the employee.
The employer usually matches the employee's contribution up to
a stated limit.
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DEMAND DEPOSIT
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Customer assets that are held in a checking
account. Funds can be readily withdrawn by check, “on demand.”
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DEMUTUALIZATION
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The conversion
of insurance companies from mutual companies owned by their policyholders
into publicly-traded stock companies.
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DEPOSITORY INSTITUTION
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Financial institution that obtains its funds
mainly through deposits from the public. Includes commercial banks,
savings and loan associations, savings banks, and credit unions.
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DEREGULATION
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In insurance,
reducing regulatory control over insurance rates and forms. Commercial
insurance for businesses of a certain size has been deregulated
in many states.
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DERIVATIVES
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Contracts that derive their value from an underlying
financial asset, such as publicly-traded securities and foreign
currencies. Often used as a hedge against changes in value.
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DIMINUTION OF VALUE
|
The idea that
a vehicle loses value after it has been damaged in an accident
and repaired.
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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.
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DIRECT SALES/ DIRECT RESPONSE
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Method of selling insurance directly to the
insured through an insurance company’s own employees, through
the mail, or via the Internet. This is in lieu of using captive
or exclusive agents.
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DIRECT WRITERS
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Insurance companies that sell directly to the
public using exclusive agents or their own employees, through
the mail, or via 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.
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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, often by shareholders. Directors
and officers insurance policies usually contain two coverages:
personal coverage for individual directors and officers who are
not indemnified by the corporation for their legal expenses or
judgments against them – some corporations are not required by
their corporate or state charters to provide indemnification;
and corporate reimbursement coverage for indemnifying directors
and officers. Entity coverage for claims made specifically against
the company may also be available.
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DIVIDENDS
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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. Life insurance policies that pay
dividends are called participating policies.
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DOMESTIC INSURANCE COMPANY
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Term used
by a state to refer to any company incorporated there.
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