Nahai Insurance

GLOSSARY

GENERAL
PERSONAL INSURANCE
BUSINESS INSURANCE
LIFE INSURANCE
ANNUITIES
HEALTH INSURANCE

GENERAL

Additional Insured - A person or entity other than the named insured that has an insurable interest in the covered risk and is protected under the terms of the contract.

Admitted Company - An insurance company authorized and licensed to do business in a given state and subject to regulation by the state's Department of Insurance.

Binder - An agreement executed by an agent or insurer, putting insurance into force before the contract has been written or the premium paid.

Cancellation (Flat) - A policy that is cancelled upon its inception date, with the full premium returned to the insured.

Cancellation (Pro Rata) - Cancellation of an insurance policy, whereby the premium returned is proportional to the exact time coverage was in force.

Cancellation (Short Rate) - Cancellation of an insurance policy, in which the premium returned to the insured is not in direct proportion to the number of days of coverage. A lesser premium is returned serving as a penalty for midterm cancellation by the insured.

Construction Classes - A factor that affects property rates. Construction refers to the types of materials with which the building is made. There are six construction classes: frame, joisted masonry, non-combustible, masonry non-combustible, modified fire resistive and fire resistive.

Deductible - The portion of a claim which the insured is responsible for paying, before any recovery may be made from the insurer.

Endorsement - An amendment or change to a policy which alters provisions of the contract.

Exclusion - A provision that denies coverage for certain perils, persons, property, or locations.

Frequency - Represents the number of insurance claims made.

Named Insured - Any person or entity specifically designated by name as the insured(s) in a policy. This is distinguished from others who fall within the policy definition of an insured, but are unnamed.

Non-Admitted Company - An insurance company not licensed to do business in a certain state. Such companies can write coverage, however, through an Excess & Surplus Lines broker that is licensed within the jurisdiction.

Peril - The cause of a possible loss such as fire, windstorm, explosion, etc.

Premium - The price of insurance protection for a specified risk and a specific period of time.

Protection Classes - The 10 categories used by the Insurance Services Office to rank cities and towns according to the availability of water, (fire hydrants and water pressure), and the quality of firefighting, (training and paid versus volunteer personnel). Protection Class 1 indicates the best available protection; class 10 indicates a rural area without fire hydrants for fire departments. Each location has a specifically assigned protection class.

Special Form - Formerly known as "All Risks", it is a cause of loss form, which indemnifies against all risks of direct physical loss unless otherwise specifically excluded or limited. This in contrast to the Basic or Broad coverage forms which specifically name perils.

Subrogation - The right of an insurance company to recover from a third party who is wholly or partially responsible for a loss paid by an insurer.

Underwriting - The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

PERSONAL INSURANCE

Homeowners Insurance - A typical homeowners policy has two main sections: Section I provides property coverage and Section II provides personal liability coverage.

Section I - Property Coverages

Coverage A: Dwelling - Provides coverage on the structure of the home for an indicated amount of insurance. Includes everything attached to the home, such as heating and air conditioning equipment, plumbing, lighting, etc. Coverage should be written on a replacement cost basis.

Coverage B: Other Structures - Provides coverage on structures not attached to or part of the home. (i.e. detached garage, guesthouse, etc.).

Coverage C: Personal Property - Coverage applies to all of the insured's household goods and personal effects with limited coverage for jewelry, furs, and fine arts.

Coverage D: Loss of Use - Provides coverage for additional living expenses in seeking alternative accommodation if the home becomes uninhabitable following a loss.

Section II - Liability

Coverage E - Personal Liability - Provides coverage for bodily injury and/or property damage to others for which the insured is legally liable.

Coverage F - Medical Payments to Others - Covers the medical expenses for injuries sustained by a third party as a result of the insured's activities, regardless of liability.

Automobile Insurance - A type of insurance which protects the insured against losses involving automobiles. Different coverages can be purchased and fall under the following options:

Part A:
Bodily Injury Liability - A legal liability that may arise as a result of the injury or death of another person.
Property Damage Liability - Protection against liability for damage to the property of others including loss of use of the property.

Part B:
Medical Payments - Coverage that provides for the payment of medical expenses to the insured and any other passengers without regard to liability.

Part C:
Uninsured/Underinsured Motorists Coverage - Covers damages to the insured and his or her passengers for bodily injury caused by another party who has either insufficient or no insurance for the damages sustained.

Part D:
Collision Coverage - Pays for damages to the insured vehicle as a result of collision with another vehicle or object. Comprehensive Coverage - Also known as Other than Collision Coverage. Covers losses by fire, theft, vandalism, falling objects, and various other perils.

BUSINESS INSURANCE

Aggregate Limit - Usually refers to liability insurance and indicates the maximum amount an insurer will pay under a policy in any one policy period, regardless of how many separate accidents may have occurred.

Audit - Examination of the insured's books and records to determine the premium that should be paid for the coverage provided. An interim audit occurs prior to the expiration of the policy period whereas a final audit occurs after the policy period to include such items as actual payroll and sales receipts.

Blanket Coverage - A form of property insurance that covers, in a single contract, either multiple types of property at a single location or one or more types of property at multiple locations.

Boiler and Machinery - Insurance against the sudden and accidental breakdown or explosion of boilers, machinery, electrical equipment, and other pressure vessels. Now called "Equipment Breakdown".

Business Interruption - Coverage that pays for loss of income when operations are curtailed or suspended because of a property loss. Covers the net income that would have been earned and the continuing operating expenses (payroll, rent, etc.). Coverage may also apply to extra expenses incurred for the temporary relocation of the insured's business.

Business Owners Policy (BOP) - A packaged property and liability policy in a single contract that is designed for small and medium-sized mercantile, office or apartment risks.

Commercial Automobile - Coverage may apply to owned, non-owned, hired, leased, and rented commercial automobiles. Provides liability protection and physical damage coverage. Extended coverage for uninsured/underinsured motorists, medical payments, and rental reimbursement.

Commercial Crime - Provides coverage against loss of money and securities, theft, burglary, robbery, employee dishonesty, forgery and alterations, and computer fraud.

Commercial Property - Coverage is provided for your building, business personal property, property of others, outdoor fixtures, additions and alterations made to the covered building, permanently installed fixtures, equipment, and machinery.

Commercial Umbrella - A liability policy which provides excess coverage over a primary or underlying liability policy or above a self-insured retention. Coverage is often broader than the underlying policy and may be in excess of both the General Liability and Commercial Automobile coverages.

Difference in Conditions (DIC) - Sometimes referred to as the "property umbrella" policy, this policy is designed to provide coverage beyond what is typically provided in a Broad or Special Causes of Loss Form. DIC perils focus on Earthquake, Flood, Collapse, Theft, and Transit.

Directors and Officers Liability - Insurance that protects directors and officers from liability claims arising out of alleged errors in judgement, breaches of duty, and wrongful acts related to their organizational activities.

Employment Practices Liability - A form of liability insurance covering wrongful acts arising from the employment process and an employer/employee relationship. The more common types of alleged claims under such policies include wrongful termination, sexual harassment, and discrimination.

General Liability - A form of insurance designed to protect owners and operators of businesses from liability exposures. These exposures may include liability arising out of accidents resulting from the premises or the operations of an insured, operations completed by the insured, products of an insured, and contractual liability.

Inland Marine - A broad type of insurance covering articles that may be transported from place to place (generally accepting international transit) as well as insurance for bridges, tunnels, and floater policies covering jewelry, furs, and fine arts.

Ocean Marine - Insurance for international shipments by air, vessel, truck, or rail.

Professional Liability - Coverage designed to protect traditional professionals (e.g., physicians) and quasi-professionals (e.g., real estate brokers) against liability incurred as a result of errors and omissions in performing professional services.

Workers Compensation - Insurance which covers an employer's responsibilities for injuries, disability, or death to persons in their employment, as mandated by state workers compensation legislation and other statutes.

LIFE INSURANCE

Beneficiary - The person or persons designated by the policy owner to receive the proceeds of an insurance policy upon the death of an insured. The policy owner may name both a primary and secondary beneficiary, and may change the beneficiary through a written request to the insurance company.

Buy-Sell Agreements - An agreement among owners of a business which states that the individual withdrawing from the business either due to a disability or death must sell his or her interest to the remaining owners based upon a predetermined formula for valuation.

Cash Value - The amount of cash available to the owner of a permanent life insurance contract that can be available through loans or surrender of the contract.

Joint and Survivorship (Second to Die) Life - This policy insures the lives of two people, typically a husband and wife. The death benefit is not paid to the beneficiary until the death of the second insured. These contracts are generally available as either whole life or universal life and premiums are often less than buying two separate policies.

Key Person Life - A policy on the life of a key employee whose premature death can cause the employer financial hardship. The policy is owned by and payable to the employer.

Split Dollar - An agreement under which the employer and employee share the cost of life insurance for the employee.

Term Life - Insurance which provides a death benefit only. Premiums increase each year with age or in the case of level premium renewable term, at the end of each renewal period (typically 5, 10, 15, or 20 years). Level premium decreasing term has a level premium, but the insurance benefit decreases on each policy anniversary. Since term insurance can become quite expensive at older ages, it is often used to cover protection needs of a shorter duration.

Universal Life - A flexible premium policy under which the policyholder may change the death benefit from time to time (with evidence of insurability) and vary the amount or timing of premium payments. This policy also builds cash value which maybe borrowed against or surrendered in full.

Variable Life - Whole life, or universal life, contracts having values that fluctuate according to the investment performance of the underlying mutual funds. While they have no guaranteed cash value, they often have a minimum guaranteed death benefit. Unlike conventional products, variable products are regulated by the Securities and Exchange Commission and sold with a prospectus.

Whole Life - Permanent insurance which provides, at minimum, a level death benefit upon the insured's death, or cash endowment upon policy maturity that is equal to the death benefit.

ANNUITIES

Annuity - A policy where an individual makes a single premium payment or series of premium payments to a financial institution in exchange for future periodic payments.

Deferred Annuity - A type of contract where the payout period is deferred. The policy owner's balance grows with credited interest or fund appreciation.

Fixed Annuity - Credit interest at a fixed rate to the policy owner's balance as specified in the contract. The fixed rate can be changed at specified periods.

Immediate Annuity - Payments to the policy owner begin immediately with this type of contract. A lump sum deposit is received and payments are made to the policy owner usually monthly for a specified period of time or as long as the person lives.

HEALTH INSURANCE

Coinsurance - A specific percentage of shared medical expenses between the insured and the insurer. It is normally triggered after the insured has satisfied the plan deductible. Generally, the insurance company pays a proportionately higher percentage amount of the medical expenses than the insured (i.e. 80%-20%).

Copayment - A fixed fee that a health plan member pays for a specific medical service, such as an office visit or a prescription drug.

Deductible - The amount an individual or family must pay for health services each year before the insurance company pays.

Health Maintenance Organization (HMO) - A type of managed care plan where members pay a fixed monthly fee, regardless of how much medical care is needed in a given month. Members choose a primary care physician (PCP) within a network that provides them with general medical care. Members pay a copayment each time they receive medical care from their PCP. The member must contact the PCP to be referred to any specialist. Medical care that is provided from non-HMO providers generally is not covered.

Preferred Provider Organization (PPO) - A network of hospitals and physicians that agree to provide healthcare services to subscribers of health insurance contracts at pre-negotiated rates usually under contract with an insurance company. A subscriber is free to choose from any enlisted preferred provider and in doing so lower their out-of-pocket expense. Subscribers have the ability to make self-referrals to physicians inside and/or outside of PPO network, however out of network services are associated with a higher cost.

Point of Service (POS) -A type of managed care plan that is a hybrid of an HMO and a PPO providing generally three levels of coverage: an HMO, a PPO, and out of network providers. Members have the option to use a healthcare provider within the network and be subject to a copayment or to utilize services outside the network and be subject to a deductible and coinsurance.

Stop Loss - A provision which is the maximum amount of a claim that the insured will be required to share with the insurer. After this amount is reached, the insured no longer participates in sharing the expenses incurred. It is typically a stated dollar amount.