Insurance Glossary

Let us worry about insurance terminology but just in case you are curious, search our glossary for any terms you may be curious about.


A licensed individual or organization authorized to sell and service insurance policies for an insurance company.

Agreed Medical Examiner (AME)
A physician who may be selected by the parties together, when an injured worker is represented by an attorney, to assess any disputed medical-legal issues.

A short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.

A licensed individual or organization who sells and services insurance polices on your behalf.

A licensed individual who can act as an agent representing one or more insurers, and also as a broker dealing with one or more insurers representing your interests.

The termination of an in-force insurance contract by either the insured or the insurer before its normal expiration date.

Notice to an insurance company that a loss has occurred that may be covered under the terms and conditions of the policy.

Claim Adjuster
The person who evaluates the damage caused by a covered loss and determines the amount to be paid under the policy terms.

Commercial Lines
Insurance coverages for businesses, commercial institutions, and professional organizations, as contrasted with personal insurance.

A portion of the policy premium that is paid to an agent by the insurance company as compensation for the agent’s work.

The portion of an insurance contract that sets forth the rights and duties of the insured and the insurer.

Consequential Bodily Injury
In Workers Compensation, special circumstances can arise when a work-related injury causes some sort of non-work related injury.  (Please see Loss of Consortium, Dual Capacity, and Third Party Over glossary definitions.)

Protection that is provided under an insurance policy.

Declarations (DEC) Page
Usually the first page of an insurance policy that contains the full legal name of the insurance company, the policy number, effective and expiration dates, premium payable, the amount and types of coverage, and the deductibles.

The amount of the loss that the insured is responsible to pay before benefits from the insurance policy are payable.

Dual Capacity
In Workers Compensation an employer may be liable two ways to an employee who incurs bodily on the job as a result of using a product or service produced by that employer. The employee is eligible for Workers Compensation benefits and may also sue the employer because of the defectiveness of the injuring product or service.

Earned Premium
The portion of the policy premium paid by an insured that has been allocated to the insurance company’s loss experience, expenses, and profit year to date.

A written agreement that changes the terms of an insurance policy by adding or subtracting coverage.

Effective Date
The starting date of an insurance policy: the date the policy goes into force.

A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.

Experience Modification
The adjustment of premium resulting from the use of experience rating. Experience rating plans reflect an insured’s past loss experience (usually from the past three years) and use this experience to modify and determine the premium for the current policy year.

Expiration Date
The termination date of coverage as indicated on an insurance policy.

First Party
The policyholder (insured) in an insurance contract.

Flat Cancellation
Cancellation that takes place on the policy effective date. No premium charge is made; however, other charges (i.e. service) may apply.

An intentionally deceptive act committed to obtain an unfair or unlawful advantage. Fraud usually involves monetary gain.

The number of times a loss occurs.

A circumstance that increases the likelihood or potential severity of a loss.

In a property and casualty contract, the objective is to restore an insured to the same financial position after the loss that the insured had prior to the loss. In the most basic sense, indemnity is compensation for a loss.

Independent Adjuster
A person or organization that provides claim adjusting services to different insurers on a contract basis.

A method of shifting risk from a person, business, or organization to an insurance company in exchange for the payment of premium. The insurance company commits to be responsible for covered losses.

The policyholder(s) entitled to coverage under an insurance policy.

The insurance company who issues insurance and agrees to pay for losses and provide covered benefits.

Judgment Rating
A rating modification (either decrease or increase) that is based on the underwriter’s experience, best judgment, and analysis in classifying and underwriting a particular type of risk.

In property and casualty insurance, a lapse is the termination of a policy because of a failure to pay premium when due.

Liability Insurance
Coverage for a policyholder’s legal liability resulting from injuries to other persons or damage to their property.

A certificate of authority issued by the CDI to an insurer, agent, broker, or broker-agent to transact insurance business.

Limits of Insurance
The maximum amount of benefits the insurance company agrees to pay in the event of a loss.

Loss of Consortium
A potential situation in any bodily injury claim (including Workers Compensation claims) where a spouse contends that the bodily injury of their partner deprives them of the natural affection (spousal duties), help, and companionship of said spouse.

Managing General Agent (MGA)
An agent contractually authorized by an insurance company to manage all or part of the insurer’s business activities. An MGA can manage the marketing, underwriting, policy issuance, premium collection, appointing and supervision of other agents, claims payments, and reinsurance negotiations of an insurance company.

Material Misrepresentation
A factual falsification made in such a manner that the insurance company would have refused to insure the risk if the truth had been known at policy issuance. A material misrepresentation gives an insurance company grounds to rescind a contract.

An incorrect estimate of an insurance premium.

Nonpayment of Premium
Failure by the policyholder to pay the premium on a policy or pay the installment premium payments due on a policy.

The termination of an insurance policy on its normal expiration date.

Occupational Accident
A work-related accident that injures an employee.

Occupational Disease
An illness contracted as a result of employment-related exposures and conditions.

Occupational Hazard
A condition that exists in an occupation and surrounding work environment that increases the peril of accident, illness, or death.

A liability insurance policy that covers claims arising out of occurrences that take place during the policy period, regardless of when the claim is filed.

Permanent Disability Rating Schedule
The schedule that is used to determine and modify the percentage of permanent disability of an injured worker.

Personal Lines
Insurance written on the personal and real property of an individual (or individuals) to include such policies as Homeowners insurance and personal auto insurance, as contrasted with commercial lines.

A contract that states the rights and duties of the insurance company and the insured.

The monetary payment that an insured makes to an insurance company in exchange for the contract indemnifying the insured against potential loss. Simply put this is the payment made by the insured to keep an insurance policy in effect.

A term used by the insurance industry to refer to agent, brokers, broker-agents, and solicitors.

Pro Rata Cancellation
A cancellation of a policy by an insurance company that returns the unearned premium to the policyholder (the portion of the premium for the remaining time period that the policy will not be in force).

The statement of policy conditions in an insurance policy.

Qualified Medical Evaluator (QME)
Appointed and regulated by DWC Medical Unit, a QME assesses an injured worker’s permanent impairment and limitations and evaluates a wide variety of disputed medical-legal issues. Often, a QME performs a separate medical evaluation when the treating physicians assessment is disputed.

An estimate of the cost of insurance based on the information supplied to the agent, broker, broker-agent, or the insurance company.

Rescission (or Rescission)
The cancellation of an insurance policy back to its effective date resulting in a return of all premium charged.

Requirements developed by the CDI that implement laws passed by the legislature. Regulations go through a public comment process and must be approved by the state Office of Administrative Law.

The restoration of a lapsed or canceled policy.

The continuation of an insurance policy (offer of renewal) into a new term from the same insurance company that issued the existing policy.

Schedule Rating
A method of pricing property and liability insurance. Schedule Rating uses debits and credits to modify a base rate figured by the special characteristics of the risk exposure. Insurers develop Schedule Rating because actuarial experience shows a direct relationship between certain physical characteristics and the possibility of loss. Most schedule rating plans must be filed and approved by the CDI.

Second Party
The insurance company in an insurance contract.

Self-Insured Retention (SIR)
The portion of a property or liability loss retained by a policyholder.

The size of a loss. Loss severity is used as a factor in establishing premium rates.

Short Rate Cancellation
A cancellation initiated by policyholder request in which the premium returned is subject to an administrative penalty.

The process of recovering the amount of claim damages paid out to a policyholder from the legally liable party. When a company pursues the legally liable third party, they are required to include the policyholder’s deductible in the recovery process.

Third Party
An individual other than the policyholder or the insurance company who has suffered a loss and may be able to collect compensation under the policy due to the negligent acts or omissions of the policyholder.

Third Party Over
The legal doctrine that involves an injured employee bring suit against a third party who (for one reason or another) is able to bring an action against the employer.

The process to evaluate the insurance application and independent sources in order to verify the information provided and to determine the acceptability of the risk.

The person who performs the underwriting process to accept, reject, or modify risks on behalf of the insurer.

Unearned Premium
The portion of the written premium applicable to the unexpired or unused part of the policy period for which the premium has been paid. For example, in an annual premium policy 11/12 of the premium is unearned at the end of the first month of the policy.

The relinquishment of a known right, which may be expressed or implied.

Written Premium
The total premium on all policies written by an insurer during a specified period of time, regardless of what portion has been earned.