AAI® accredited advisor in insurance.

ACLI American Council of Life Insurance.

ACV See actual cash value.

AD&D accidental death and dismemberment.

ADPL See accidental direct physical loss.

AIDS Acquired Immunodeficiency Syndrome.

AIPSO Automobile Insurance Plans Service Office.

AMTC Agency Management Training Course.

ARM See associate in risk management.

abandonment Surrender to an insurer the insured property after the event insured against has occurred. Not permitted under most property insurance contracts.

absolute assignment Assignment by the policy owner of all control and rights to a third party.

accident An unforeseen and unintentional act identifiable in time and place.

accident and health insurance Insurance under which benefits are payable in case of disease, accidental injury, or accidental death. Also called health insurance, personal health insurance, sickness and accident insurance.

accidental bodily injury A bodily injury which is not intentionally self?inflicted.

accidental death benefit A form of insurance that provides payment if death of the insured results from an accident, subject to the conditions of the specific policy. Accidental death insurance is often combined with dismemberment insurance in a form called Accidental Death & Dismemberment (AD&D).

accidental direct physical loss (ADPL) Property insurance that covers an insured against essentially all perils except those specifically excluded.

accumulation account An account to which funds are added and from which risk charges are deducted. The balance earns interest.

acquisition cost The cost to a company of securing business, including commissions, inspection costs, etc.

act of God An occurrence which results from natural causes without any human intervention and could not have been prevented by reasonable care or foresight (e.g., flood, lightning, earthquake, hurricane).

actual cash value (ACV) The amount that the property in question could have been sold for by the insured on the date of the loss. Computed on the basis of replacement value less its depreciation by obsolescence or general wear.

actuary A person trained in mathematics whose job is to apply the theory of probability to the business of insurance to develop insurance rates. This is done largely from past experience, though future probable trends are also taken into account.

additional insured/additional interest Some person, other than the original named insured, who is entitled to protection under a policy either by virtue of the wording of the basic policy or because the policy has been modified to protect such interest.

additional living expense clause A type of coverage that may be included in a policy that provides funds to pay for increased living costs that result from damage covered by the policy.

adjustable premium The contractual right of a company to modify a policy owner's premium payments under certain specified conditions.

adjuster An individual representing the insurance company who works on agreements regarding the amount of a loss and liability issues.

adjustment income One of the basic uses for life insurance. Also called "readjustment income." An added "step-down" income beyond what is required to cover the family's minimum needs, which helps the family adjust to the shock of a lower income following the insured's death.

admitted company An insurance company authorized and licensed to transact business in a given state.

advance premium, or deposit premium The premium for many policies depends on payroll or some other factor which can only be determined accurately at the end of the policy period. In such cases, an estimated premium is charged in advance and an adjustment is made at the close of the policy term.

adverse selectionSelection "against the company." The tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, the tendency of policy owners to take advantage of favorable options in insurance contracts. Adverse selection may result in high loss ratios.

age limits Set ages contained in a specific policy for the insuring of new applicants or for the renewal of that policy.

agency 1) A situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties. 2) An insurance sales office.

agent An individual appointed by an insurance company to solicit, negotiate, effect or countersign insurance contracts, and to provide policyholder services on its behalf.

alien company An insurance company incorporated or organized under the laws of a foreign nation, province, or territory.

all-risk coverage see accidental direct physical loss.

allied lines insurance Coverage for such miscellaneous perils as floods, earthquakes, and sprinkler leakage, all of which have no immediate relationship to fire insurance but are normally associated with it. Some of these perils are written by endorsement to the fire contract; others are written in separate policies.

amount subject The total value which is exposed to loss at any one location or from any one event.

annuitant The person whose life is measured to determine the timing and amount of annuity payments.

annuity A contract that provides for a stipulated sum payable at certain regular intervals during the lifetime of one or more persons, or payable for a specified period.

application A form designed to show whether the person seeking insurance meets the company's underwriting requirements and to establish proper price or rating. Requested coverage may be accepted, modified, or declined.

apportionment clause This clause provides that if there is other insurance covering the loss, the policy to which the clause is attached will not pay more than its pro rata share of the loss.

appraisal clause Used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute. In general, each party selects its own appraiser. If the appraisers cannot agree, they select an umpire. An agreement by any two is binding on all parties.

appurtenant structures Buildings located on the same premises as the main building insured under a property policy (e.g., a tool shed).

arbitration clause In a property insurance contract, a clause that provides that if the policyholder and the company cannot agree on the settlement amount on a claim, they both select a neutral arbitrator. Any differences between the arbitrators are submitted to an umpire. The amount agreed to by any two of the three will be the amount of reimbursement.

arson The willful and malicious burning of any property.

assigned risk A risk which is not ordinarily acceptable to insurers and, thus, is "assigned" to an insurer by an assigned risk pool or plan. Each participating company agrees to accept its share of these risks.

assignee The person, firm or corporation to whom a right or rights under a policy are transferred by means of an assignment.

assignment The transfer of a policy or certain policy rights from one party to another.

Associate in Risk Management (ARM) A designation granted by the American Institute for Property and Casualty Underwriters to qualified persons who successfully pass a series of examinations.

association group insurance Group insurance issued to an association rather than to an employer or union.

assumed expense Refers to the amount of money that will be spent to get a policy into the hands of the policyholder. These costs include such items as commissions, underwriting expenses, salaries for company employees, state insurance filing fees and product development costs.

assumed interest Assumed interest is an estimate of how much a company will earn on the money it receives from policyholders.

assumed liability See contractual liability.

assumed mortality An estimate of when a policyholder is likely to die and is based primarily on age, but it can be influenced by health. Mortality tables covering large cross sections of people in varying degrees of health, different occupations and multiple lifestyles have been developed to help insurance companies determine the average number of people of any given age who will die within a certain year.

attained age The age an insured has reached on a given date.

attorney-in-fact A person or entity given the power of performing stated acts for another person. This is done by a written contract, called a "power of attorney." Often used to define the powers of the person or entity which operates a reciprocal or interinsurance exchange.

attractive nuisance Any object, place or condition that is attractive to children and may prove harmful to them. People may be held liable for injuries to children caused by an attractive nuisance, even if the children were trespassing when they got hurt.

audit A survey or examination of the insured's books (payroll records) or other records to determine the premium due the carrier for coverage provided.

authorization The amount of insurance which an insurer will accept from a broker; also the limit of authority for a claims adjuster in settling losses on his/her own initiative.

automatic coverage Subject to contract terms, coverage of additional property or other risk by an existing contract without specific request by the insured.

automatic premium loan An option which may be available on certain policies to automatically pay premiums in default at the end of the grace period by charging the amount against the policy as a policy loan.

automatic reinstatement clause In a property insurance contract, a clause providing for the automatic restoration of the full face value of the policy after the payment of a loss.

average rate A rate used in fire insurance to determine the premium for a policy or policies covering more than one location or more than one type of property. It is obtained by multiplying the rate for each location by the value at that location, totaling the premium for all locations, and dividing the sum of the results by the total value.