Glossary
of Insurance Terms
TERM INSURANCE
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A form of life insurance
that covers the insured person for a certain period of time, the “term”
that is specified in the policy. It pays a benefit to a designated beneficiary
only when the insured dies within that specified period which can be
one, five, 10 or even 20 years. Term life policies are renewable but
premiums increase with age.
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TERRITORIAL RATING
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A method of classifying
risks by geographic location to set a fair price for coverage. The location
of the insured may have a considerable impact on the cost of losses.
The chance of an accident or theft is much higher in an urban area than
in a rural one, for example.
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TERRORISM COVERAGE
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Included as a part of the package in standard
commercial insurance policies before September 11, 2001 virtually free
of charge. Since September 11, terrorism coverage prices have increased
substantially to reflect the current risk.
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THIRD-PARTY ADMINISTRATOR
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Outside group that performs clerical functions
for an insurance company.
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THIRD-PARTY COVERAGE
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Liability coverage purchased by the policyholder
as a protection against possible lawsuits filed by a third party.
The insured and the insurer are the first and second parties to
the insurance contract. (See First-party coverage)
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TIME DEPOSIT
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Funds that are held
in a savings account for a predetermined period of time at a set interest
rate. Banks can refuse to allow withdrawals from these accounts until
the period has expired or assess a penalty for early withdrawals.
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TITLE INSURANCE
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Insurance that indemnifies the owner of real
estate in the event that his or her clear ownership of property is challenged
by the discovery of faults in the title.
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TORT
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A legal term denoting
a wrongful act resulting in injury or damage on which a civil court
action, or legal proceeding, may be based.
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TORT LAW
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The body of law
governing negligence, intentional interference, and other wrongful acts
for which civil action can be brought, except for breach of contract,
which is covered by contract law.
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TORT REFORM
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Refers to legislation designed to reduce liability
costs through limits on various kinds of damages and through modification
of liability rules.
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TOTAL LOSS
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The condition of
an automobile or other property when damage is so extensive that repair
costs would exceed the value of the vehicle or property.
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TRANSPARENCY
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A term used to explain
the way information on financial matters, such as financial reports
and actions of companies or markets, are communicated so that they are
easily understood and frank.
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TREASURY SECURITIES
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Interest-bearing obligations of the U.S. government
issued by the Treasury as a means of borrowing money to meet government
expenditures not covered by tax revenues. Marketable Treasury securities
fall into three categories — bills, notes and bonds. Marketable Treasury
obligations are currently issued in book entry form only; that is, the
purchaser receives a statement, rather than an engraved certificate.
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TREATY REINSURANCE
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A standing agreement
between insurers and reinsurers. Under a treaty each party automatically
accepts specific percentages of the insurer’s business.
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