Glossary
of Insurance Terms
IDENTITY THEFT INSURANCE
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Coverage for expenses incurred as the result
of an identity theft. Can include costs for notarizing fraud affidavits
and certified mail, lost income from time taken off from work
to meet with law-enforcement personnel or credit agencies, fees
for reapplying for loans and attorney's fees to defend against
lawsuits and remove criminal or civil judgments.
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INCURRED BUT NOT REPORTED LOSSES / IBNR
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Losses that are not filed with the insurer or
reinsurer until years after the policy is sold. Some liability
claims may be filed long after the event that caused the injury
to occur. Asbestos-related diseases, for example, do not show
up until decades after the exposure. IBNR also refers to estimates
made about claims already reported but where the full extent of
the injury is not yet known, such as a workers compensation claim
where the degree to which work-related injuries prevents a worker
from earning what he or she earned before the injury unfolds over
time. Insurance companies regularly adjust reserves for such losses
as new information becomes available.
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INCURRED LOSSES
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Losses occurring within a fixed period, whether
or not adjusted or paid during the same period.
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INDEMNIFY
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Provide financial compensation for losses.
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INDEPENDENT AGENT
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Agent who
is self-employed, is paid on commission, and represents several
insurance companies. (See Captive
agent)
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INDIVIDUAL RETIREMENT ACCOUNT/IRA
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A tax-deductible
savings plan for those who are self-employed, or those whose earnings
are below a certain level or whose employers do not offer retirement
plans. Others may make limited contributions on a tax-deferred
basis. The Roth IRA, a special kind of retirement account created
in 1997, may offer greater tax benefits to certain individuals.
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INFLATION GUARD CLAUSE
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A provision
added to a homeowners insurance policy that automatically adjusts
the coverage limit on the dwelling each time the policy is renewed
to reflect current construction costs.
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INLAND MARINE INSURANCE
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This broad
type of coverage was developed for shipments that do not involve
ocean transport. Covers articles in transit by all forms of land
and air transportation as well as bridges, tunnels and other means
of transportation and communication. Floaters that cover expensive
personal items such as fine art and jewelry are included in this
category. (See Floater)
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INSOLVENCY
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Insurer’s inability to pay debts. Insurance
insolvency standards and the regulatory actions taken vary from
state to state. When regulators deem an insurance company is in
danger of becoming insolvent, they can take one of three actions:
place a company in conservatorship or rehabilitation if the company
can be saved or liquidation if salvage is deemed impossible. The
difference between the first two options is one of degree – regulators
guide companies in conservatorship but direct those in rehabilitation.
Typically the first sign of problems is inability to pass the
financial tests regulators administer as a routine procedure.
(See Liquidation;
Risk-based
capital)
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INSTITUTIONAL INVESTOR
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An organization
such as a bank or insurance company that buys and sells large
quantities of securities.
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INSURABLE RISK
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Risks for
which it is relatively easy to get insurance and that meet certain
criteria. These include being definable, accidental in nature,
and part of a group of similar risks large enough to make losses
predictable. The insurance company also must be able to come up
with a reasonable price for the insurance.
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INSURANCE
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A system to
make large financial losses more affordable by pooling the risks
of many individuals and business entities and transferring them
to an insurance company or other large group in return for a premium.
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INSURANCE POOL
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A group of
insurance companies that pool assets, enabling them to provide
an amount of insurance substantially more than can be provided
by individual companies to ensure large risks such as nuclear
power stations. Pools may be formed voluntarily or mandated by
the state to cover risks that can’t obtain coverage in the voluntary
market such as coastal properties subject to hurricanes. (See
Beach
and windstorm plans;
Fair
access to insurance requirements plans / FAIR plans;
Joint
underwriting association / JUA)
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INSURANCE REGULATORY INFORMATION SYSTEM /
IRIS
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Uses financial
ratios to measure insurers’ financial strength. Developed by the
National Association of Insurance Commissioners. Each individual
state insurance department chooses how to use IRIS.
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INSURANCE SCORE
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Insurance scores are confidential rankings based
on credit information. This includes whether the consumer has
made timely payments on loans, the number of open credit card
accounts and whether a bankruptcy filing has been made. An insurance
score is a measure of how well consumers manage their financial
affairs, not of their financial assets. It does not include information
about income or race.
Studies have shown that people who manage their
money well tend also to manage their most important asset, their
home, well. And people who manage their money responsibly also
tend to handle driving a car responsibly. Some insurance companies
use insurance scores as an insurance underwriting and rating tool.
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INSURANCE-TO-VALUE
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Insurance written in an amount approximating
the value of the insured property.
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INTEGRATED BENEFITS
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Coverage where the distinction between job-related
and non-occupational illnesses or injuries is eliminated and workers
compensation and general health coverage are combined. Legal obstacles
exist, however, because the two coverages are administered separately.
Previously called twenty-four hour coverage.
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INTERMEDIATION
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The process
of bringing savers, investors and borrowers together so that savers
and investors can obtain a return on their money and borrowers
can use the money to finance their purchases or projects through
loans.
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INTERNET INSURER
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An insurer
that sells exclusively via the Internet.
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INTERNET LIABILITY INSURANCE
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Coverage designed to protect businesses from
liabilities that arise from the conducting of business over the
Internet, including copyright infringement, defamation, and violation
of privacy.
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INVESTMENT INCOME
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Income generated by the investment of assets.
Insurers have two sources of income, underwriting (premiums less
claims and expenses) and investment income. The latter can offset
underwriting operations, which are frequently unprofitable.
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