Glossary
of Insurance Terms
EARLY WARNING SYSTEM
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A system of
measuring insurers’ financial stability set up by insurance industry
regulators. An example is the Insurance Regulatory Information
System (IRIS), which uses financial ratios to identify insurers
in need of regulatory attention.
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EARNED PREMIUM
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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.
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EARTHQUAKE INSURANCE
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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.
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ECONOMIC LOSS
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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.
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ELECTRONIC COMMERCE / E-COMMERCE
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The sale of
products such as insurance over the Internet.
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ELIMINATION PERIOD
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A kind of
deductible or waiting period usually found in disability policies.
It is counted in days from the beginning of the illness or injury.
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EMPLOYEE RETIREMENT INCOME SECURITY ACT /
ERISA
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Federal legislation that protects employees
by establishing minimum standards for private pension and welfare
plans.
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EMPLOYMENT PRACTICES LIABILITY COVERAGE
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Liability insurance for employers that covers
wrongful termination, discrimination, or sexual harassment toward
the insured’s employees or former employees.
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ENDORSEMENT
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A written
form attached to an insurance policy that alters the policy’s
coverage, terms, or conditions. Sometimes called a rider.
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ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE
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A form of
insurance designed to cover losses and liabilities arising from
damage to property caused by pollution.
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EQUITY
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In investments,
the ownership interest of shareholders. In a corporation, stocks
as opposed to bonds.
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ERRORS AND OMISSIONS COVERAGE / E&O
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A professional
liability policy covering the policyholder for negligent acts
and omissions that may harm his or her clients.
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ESCROW ACCOUNT
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Funds that
a lender collects to pay monthly premiums in mortgage and homeowners
insurance, and sometimes to pay property taxes.
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EXCESS AND SURPLUS LINES
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Property/casualty coverage that isn’t available
from insurers licensed by the state (called admitted insurers)
and must be purchased from a non-admitted carrier.
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EXCESS OF LOSS REINSURANCE
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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.
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EXCLUSION
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A provision
in an insurance policy that eliminates coverage for certain risks,
people, property classes, or locations.
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EXCLUSIVE AGENT
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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. (See
Captive agent)
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EXPENSE RATIO
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Percentage of each premium dollar that goes
to insurers’ expenses including overhead, marketing, and commissions.
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EXPERIENCE
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Record of losses.
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EXPOSURE
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Possibility of loss.
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EXTENDED COVERAGE
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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.
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EXTENDED REPLACEMENT COST COVERAGE
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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. (See
Guaranteed
replacement cost coverage)
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