Glossary
of Insurance Terms
PACKAGE POLICY
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A single insurance
policy that combines several coverages previously sold separately.
Examples include homeowners insurance and commercial multiple
peril insurance.
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PAY-AT-THE-PUMP
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A system proposed
in the 1990s in which auto insurance premiums would be paid to
state governments through a per-gallon surcharge on gasoline.
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PENSION BENEFIT GUARANTY CORPORATION
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An independent
federal government agency that administers the Pension Plan Termination
Insurance program to ensure that vested benefits of employees
whose pension plans are being terminated are paid when they come
due. Only defined benefit plans are covered. Benefits are paid
up to certain limits.
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PENSIONS
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Programs to provide employees with retirement
income after they meet minimum age and service requirements. Life
insurers hold some of these funds. Since the 1970s responsibility
for funding retirement has increasingly shifted from employers
(defined benefit plans that promise workers a specific retirement
income) to employees (defined contribution plans financed by employees
that may or may not be matched by employer contributions). (See
Defined benefit plan;
Defined contribution plan)
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PERIL
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A specific
risk or cause of loss covered by an insurance policy, such as
a fire, windstorm, flood, or theft. A named-peril policy covers
the policyholder only for the risks named in the policy in contrast
to an all-risk policy, which covers all causes of loss except
those specifically excluded.
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PERSONAL ARTICLES FLOATER
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A policy or
an addition to a policy used to cover personal valuables, like
jewelry or furs.
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PERSONAL INJURY PROTECTION COVERAGE / PIP
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Portion of an auto insurance policy that covers
the treatment of injuries to the driver and passengers of the
policyholder’s car.
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PERSONAL LINES
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Property/casualty insurance products that are
designed for and bought by individuals, including homeowners and
automobile policies. (See Commercial lines)
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POINT-OF-SERVICE PLAN
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Health insurance policy that allows the employee
to choose between in-network and out-of-network care each time
medical treatment is needed.
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POLICY
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A written
contract for insurance between an insurance company and policyholder
stating details of coverage.
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POLICYHOLDERS' SURPLUS
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The amount
of money remaining after an insurer’s liabilities are subtracted
from its assets. It acts as a financial cushion above and beyond
reserves, protecting policyholders against an unexpected or catastrophic
situation.
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POLITICAL RISK INSURANCE
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Coverage for businesses operating abroad against
loss due to political upheaval such as war, revolution, or confiscation
of property.
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POLLUTION INSURANCE
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Policies that cover property loss and liability
arising from pollution-related damages, for sites that have been
inspected and found uncontaminated. It is usually written on a
claims-made basis so policies pay only claims presented during
the term of the policy or within a specified time frame after
the policy expires. (See Claims-made policy)
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POOL
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See
Insurance pool
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PREFERRED PROVIDER ORGANIZATION
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Network of medical providers which charge on
a fee-for-service basis, but are paid on a negotiated, discounted
fee schedule.
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PREMISES
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The particular
location of the property or a portion of it as designated in an
insurance policy.
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PREMIUM
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The price
of an insurance policy, typically charged annually or semiannually.
(See Direct premiums;
Earned premium;
Unearned premium)
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PREMIUM TAX
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A state tax
on premiums paid by its residents and businesses and collected
by insurers.
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PREMIUMS IN FORCE
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The sum of
the face amounts, plus dividend additions, of life insurance policies
outstanding at a given time.
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PREMIUMS WRITTEN
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The total
premiums on all policies written by an insurer during a specified
period of time, regardless of what portions have been earned.
Net premiums written are premiums written after reinsurance transactions.
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PRIMARY COMPANY
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In a reinsurance
transaction, the insurance company that is reinsured.
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PRIMARY MARKET
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Market for new issue securities where the proceeds
go directly to the issuer.
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PRIME RATE
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Interest rate that banks charge to their most
creditworthy customers. Banks set this rate according to their
cost of funds and market forces.
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PRIOR APPROVAL STATES
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States where insurance companies must file proposed
rate changes with state regulators, and gain approval before they
can go into effect.
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PRIVATE MORTGAGE INSURANCE
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See
Mortgage guarantee insurance
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PRIVATE PLACEMENT
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Securities that are not registered with the
Securities and Exchange Commission and are sold directly to investors.
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PRODUCT LIABILITY
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A section
of tort law that determines who may sue and who may be sued for
damages when a defective product injures someone. No uniform federal
laws guide manufacturer’s liability, but under strict liability,
the injured party can hold the manufacturer responsible for damages
without the need to prove negligence or fault.
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PRODUCT LIABILITY INSURANCE
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Protects manufacturers’ and distributors’ exposure
to lawsuits by people who have sustained bodily injury or property
damage through the use of the product.
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PROFESSIONAL LIABILITY INSURANCE
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Covers professionals for negligence and errors
or omissions that injure their clients.
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PROPERTY/CASUALTY INSURANCE
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Covers damage to or loss of policyholders’ property
and legal liability for damages caused to other people or their
property. Property/casualty insurance, which includes auto, homeowners
and commercial insurance, is one segment of the insurance industry.
The other sector is life/health. Outside the United States, property/casualty
insurance is referred to as nonlife or general insurance.
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PROPERTY/CASUALTY INSURANCE CYCLE
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Industry business cycle with recurrent periods
of hard and soft market conditions. In the 1950s and 1960s, cycles
were regular with three year periods each of hard and soft market
conditions in almost all lines of property/casualty insurance.
Since then they have been less regular and less frequent.
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PROPOSITION 103
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A November
1988 California ballot initiative that called for a statewide
auto insurance rate rollback and for rates to be based more on
driving records and less on geographical location. The initiative
changed many aspects of the state’s insurance system and was the
subject of lawsuits for more than a decade
.
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PURCHASING GROUP
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An entity
that offers insurance to groups of similar businesses with similar
exposures to risk.
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