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Life Insurance Glossary


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Life Insurance Glossary provided by LOMA's Glossary of Insurance and Financial Services Terms




ABC See activity-based costing.
absolute assignment The irrevocable transfer of all of a policyowner’s ownership rights in a life insurance policy to another. Contrast with collateral assignment.
absorption costing See full costing.
accelerated death benefit A supplemental life insurance policy benefit which provides that a policyowner may elect to receive all or part of the policy’s death benefit before the insured’s death if certain conditions are met. Also known as a living benefit.
acceptance In the formation of a contract, the offeree’s unqualified agreement to be bound to the terms of the offer.
access In the management of customers' information, allowing the customer the right to review and correct his personal information.
access to records provision In a reinsurance agreement, a provision that gives the reinsurer the authority to examine the direct writer’s records related to the business conducted between the companies.
accession In property law, the right of a property owner to all that his property produces and all that is added to or united with the property.
Accident and Sickness Insurance Minimum Standards Model Act In the United States, a model law proposed by the National Association of Insurance Commissioners (NAIC) that establishes certain standards for all individual health policies other than Medicare supplement policies.
accidental death and dismemberment (AD&D) benefit A supplemental life insurance policy benefit that provides an accidental death benefit and provides a dismemberment benefit payable if an accident causes the insured to lose any two limbs or sight in both eyes.
accidental death benefit (ADB) A supplemental life insurance policy benefit that requires the insurer to pay a specified amount of money in addition to the policy’s basic death benefit if an insured dies as a result of an accident.
accord and satisfaction In contract law, a method of discharging a contract in which one party to the contract agrees to accept something other than what he was entitled to receive under the original contract.
account The basic accounting tool that a company uses to record, group, and summarize similar types of financial transactions.
account aggregation The ability to bring together on one Web site all of a customer’s financial information across all of his accounts.
account fee A fee charged to financial services customers for certain transactions, such as cash advances, late payments, or annual service.
account maintenance charge For variable annuities, an annual expense charge generally expressed as the lesser of (1) a monetary amount, such as $30 per year, or (2) a percentage, such as 2 percent, of the account value per year.
account maintenance transactions Changes to an annuity contract or its supporting administrative records that do not involve (1) immediate contributions to or disbursements from the annuity or (2) immediate changes in the investment allocations of the annuity’s accumulated value. Also called nonfinancial transactions.
accounting (1) A system or set of rules and methods for collecting, categorizing, measuring, recording, summarizing, reporting, analyzing, and monitoring financial information about the financial condition and performance of a company as a whole, as well as of segments, product lines, or divisions within the company. (2) The functional area of a company that collects, records, summarizes, analyzes, and reports data about the company’s financial condition.
accounting conservatism An approach to financial reporting that typically understates the values for a company’s assets, overstates the value of a company’s liabilities and expenses, and projects a lower level of net income than would be the case if the company used a less conservative reporting method.
accredited reinsurer An accredited reinsurer is a reinsurer that is not licensed in a given state but that meets specified financial and reporting requirements of that state and is licensed to transact insurance or reinsurance in at least one other state.
accrual-basis accounting An accounting system under which a company records revenues when they are earned and expenses when they are incurred, even if the company has not yet received the revenues or paid the expenses. Contrast with cash-basis accounting.
accumulated cost of insurance For a given product, the total of benefits paid, accumulated at interest.
accumulated value (1) The total of an amount of money invested plus the interest earned by that money. (2) During a deferred fixed annuity’s accumulation period, the amount paid for the deferred annuity, plus the investment earnings, minus the amount of any withdrawals and fees. The accumulation value of a deferred variable annuity is the total of all subaccount values under the variable annuity. Also known as accumulation value.
accumulation at interest dividend option A policy dividend option under which a participating insurance policyowner can choose to leave any policy dividends the policy receives on deposit with the insurer to accumulate at interest.
accumulation period The period between the contract owner’s purchase of a deferred annuity and either the date that the contract’s payout period begins or the date that the contract’s surrender value is paid. See also deferred annuity.
accumulation unit An ownership share in a selected subaccount of a separate account held during the accumulation period of a variable deferred annuity.
accumulation value See accumulated value.
acid-test ratio See quick ratio.
ACORD A standards-developing organization that supports data and technology standards for insurance and financial services worldwide.
acquisition An arrangement in which one corporation purchases a controlling interest in another corporation, resulting in an ownership link between formerly independent corporations.
acquisition expenses For insurance and annuity products, the expenses an insurer incurs to obtain and issue new business; a type of operating expense. Some companies classify all pre-issue and first-year expenses as acquisition expenses. Other companies classify as acquisition expenses only those expenses incurred before contract issue. For these companies, expenses incurred after contract issue are classified as maintenance expenses. Contrast with maintenance expenses.
actively-at-work provision A group insurance policy provision which states that, in order to be eligible for coverage, an employee must be actively at work—rather than ill or on leave—on the day the insurance coverage is to take effect.
activities of daily living (ADLs) Activities used to measure the functional status of a person, such as eating, bathing, dressing, continence, toileting, or transferring into or out of a bed, chair, or wheelchair. Long-term care insurance benefits are triggered by an insured person's inability to perform a certain number of ADLs. Contrast with instrumental activities of daily living.
activity ratios Financial ratios that measure the speed with which a company’s various assets are converted into sales or cash. Also known as operating efficiency ratios or turnover ratios.
activity-based costing (ABC) The process of linking costs to products based on the activities performed in producing the products or services.
actual authority According to the principles of agency law, the authority to act on behalf of a principal that the principal intentionally gives to the agent and that the agent reasonably believes is given. Contrast with apparent authority.
actual cash value insurance A type of property insurance that pays the insured an amount equal to the replacement cost of the property minus an amount for depreciation.
actual damages See compensatory damages.
actuarial assumption An assigned value used in life insurance or annuity product design to represent the estimated value of a component, such as investment earnings, the cost of benefits, company expenses, and unexpected financial results.
actuarial memorandum In the United States, the part of an Actuarial Opinion and Memorandum (AOM) that consists of a lengthy report supporting the conclusion expressed in the actuarial opinion. Based on the size and complexity of the insurance company, this document may or may not be required. See also actuarial opinion.
actuarial opinion In the United States, the document in an Actuarial Opinion and Memorandum (AOM) which states that the company’s reserves are adequate, given the assets supporting them. See also actuarial memorandum.
Actuarial Opinion and Memorandum (AOM) In the United States, a formal asset-liability management (ALM) report that consists of two documents: an actuarial opinion and an actuarial memorandum. See also actuarial opinion and actuarial memorandum.
actuary An expert in financial risk management and the mathematics and modeling of insurance, annuities, and financial instruments.
AD&D benefit See accidental death and dismemberment benefit.
ADA See Americans with Disabilities Act.
ADB See accidental death benefit.
additional insured rider See second insured rider.
additional term insurance dividend option A policy dividend option under which a participating insurance policyowner can choose to use each policy dividend to purchase one-year term insurance on the insured’s life.
ADEA See Age Discrimination in Employment Act.
adjustable rate certificate of deposit See variable rate certificate of deposit.
adjustable rate mortgage (ARM) A mortgage in which the interest rate fluctuates according to a benchmark rate specified in the mortgage agreement. Also known as variable rate mortgage.
ADLs See activities of daily living.
administration expense See maintenance expense.
administrative charge A charge an insurer levies to cover the costs of issuing certain types of life insurance or annuity contracts, making administrative changes to such contracts, preparing contract owner statements, and performing general maintenance activities. Also known as administrative expense charge, administrative fee, or service fee.
administrative expense charge See administrative charge.
administrative expenses See maintenance expenses.
administrative fee See administrative charge.
administrative services only (ASO) contract A contract under which a self-insured group policyholder pays a fee in exchange for administrative services provided by an outside organization.
administrative supervision In the United States, a legal condition under which regulators require an insurer to obtain regulatory permission before taking any of a variety of specified actions.
Administrative Supervision Model Act In the United States, a model law developed by the National Association of Insurance Commissioners that provides details about a state insurance department’s authority to require administrative supervision of an insurer. Also known as the Model Supervision Act.
admitted asset In the United States, an asset whose full value can be reported on the Assets page of an insurance company's Annual Statement. Contrast with nonadmitted asset.
admitted reinsurer See authorized reinsurer.
ADR method See alternative dispute resolution method.
advance commissions Commissions a replacing insurer pays in advance to a producer for replacement business, based on the estimated contribution that will be obtained from the account the customer holds with the existing insurer.
advance earnings A loan made by an insurer to a producer in anticipation of future commissions.
advance premiums See premiums paid in advance.
advanced underwriting For new business, a group of specialists who will assist a producer in preparing sales proposals, and will accompany the producer, if requested, to sales presentations on how to use insurance products in a financial plan or estate planning.
adverse accounting opinion A type of nonstandard auditor’s opinion stating that the financial statements do not fairly present the company’s financial condition.
adverse action See adverse underwriting decision.
adverse deviation In insurance product operations, a deviation that produces a decrease in actual product profitability relative to assumed product profitability. Contrast with favorable deviation.
adverse risk experience A worse outcome from a reinsured product’s operations than the outcome the direct writer and the reinsurer assumed when setting reinsurance premium rates. Contrast with favorable risk experience.
adverse selection See antiselection.
adverse underwriting decision A decision in which an insurer (1) declines insurance coverage to an applicant, (2) terminates coverage under an existing policy, or (3) offers to insure an applicant at a higher than standard premium rate. Also known as adverse action.
Advertisement Rule (Conduct Rule 2210) In the United States, a Financial Industry Regulatory Authority (FINRA) conduct rule that establishes requirements for advertisements and sales literature used to communicate with the public.
Advertisements of Life Insurance and Annuities Model Regulation In the United States, a model law developed by the National Association of Insurance Commissioners that requires insurers to disclose to the public all relevant information in their advertisements of insurance and annuity contracts and establishes minimum standards of accuracy and fairness.
affiliate A company that controls, is controlled by, or is under common control with another company. See also subsidiary.
affiliated agent An agent who sells primarily the products of a single insurance company. Also known as an agency-building agent.
affinity group A group of people who share a common bond, background, or interest and who belong to an association or organization.
after-tax contributions Annuity contributions that contract owners or plan participants include as part of their current taxable compensation.
age and amount requirements chart See table of underwriting requirements.
Age Discrimination in Employment Act (ADEA) In the United States, a federal law that protects workers who are age 40 and older from employment discrimination because of their age.
agency See field office.
agency administration The activities performed by the people in an insurer’s home office or field offices to support and service the insurer’s field force.
agency agreement See agency contract.
agency by actual authority An agency relationship created when a principal appoints a person to be its agent, the person agrees to be the principal’s agent, and the principal gives the agent the authority to act on the principal’s behalf. Contrast with agency by apparent authority.
agency by apparent authority An agency relationship that is created when a principal does not expressly grant authority to an agent, but does intentionally or negligently allow a third party to believe the agent possesses authority. Contrast with agency by actual authority.
agency by ratification An agency relationship created when a principal ratifies an unauthorized act taken by a purported agent. See also agency by actual authority, agency by apparent authority.
agency contract A written agreement between an agent and an insurance company that outlines the agent’s role, compensation, and responsibilities to the insurance company. Also known as an agency agreement.
agency relationship The legal relationship between a principal and agent, by which the principal authorizes the agent to perform certain acts on behalf of the principal.
agency-building agent See affiliated agent.
agent In insurance sales, an independent sales representative or company employee who is authorized under the terms of an agency contract to act on behalf of an insurance company in selling insurance products. Also known as a producer.
agent-broker See broker.
agent's statement A portion of an insurance application in which a producer may report additional information that he thinks could affect the underwriting decision.
aggregate deductible See attachment point.
aggregate premium rate table A premium rate table that shows one set of premium rates for all insureds.
aggregate reserves The reserves for a block of contracts, a line of business, or an entire company.
aggregate stop loss insurance Stop-loss insurance under which the stop-loss insurer begins to reimburse the employer for claims when the employer’s total claims exceed a stated dollar amount within a stated period of time.
aggregation rule In the United States, a rule on the taxation of withdrawals from nonqualified annuities stating that all deferred annuity contracts issued (1) after October 21, 1988, (2) by the same insurer to the same contract owner, and (3) during the same calendar year are treated as one contract for purposes of determining the amount of any withdrawal that is taxable as income.
aggregator An Internet intermediary that lists products from several different companies on a single Web site.
aggressive financial strategy A financial management strategy that emphasizes taking risks to enhance a company’s profitability. Contrast with conservative financial strategy.
aggressive growth fund A mutual fund that typically invests in companies with the potential for rapid growth resulting in capital appreciation. An aggressive growth fund has a high risk of loss but potentially high returns or gains.
agreed value insurance Property insurance that pays the insured an amount agreed upon by the insured and the insurer at the time of policy issue.
AIR See assumed investment rate.
aleatory contract A contract under which one party provides something of value to another party in exchange for a conditional promise. Contrast with commutative contract.
alien corporation From the point of view of a given state in the United States, a corporation that was incorporated under the laws of another country. Contrast with foreign corporation, domestic corporation.
allied medical practitioner A licensed health care provider other than a licensed medical doctor.
allocated pension funding contract A type of pension plan contract in which all of the plan sponsor’s contributions are credited to individuals in a manner that gives the individual-participants a legally enforceable claim to the benefits attributable to those contributions. Contrast with unallocated pension funding contract.
allowable expenses In health insurance, reasonable and customary expenses that an insured incurred and that are covered under the insured’s group medical expense plans.
allowance In reinsurance, an amount the reinsurer reimburses to the direct writer and that is designed to recognize the direct writer’s acquisition, maintenance, and other expenses related to the ceded business. Also known as expense allowance, reinsurance allowance, ceding commission, or reinsurance commission.
ALM See asset-liability management.
alternative dispute resolution (ADR) method Formal or informal negotiations to resolve a legal dispute.
AMA See asset management account.
Americans with Disabilities Act (ADA) In the United States, a federal law that protects disabled individuals against all types of discrimination, including employment discrimination.
amortization In general, the reduction of a debt by regular payments of principal and interest that result in full payment of the debt by the maturity date. In accounting, the periodic and systematic increase (decrease) of the original cost of an investment to its ultimate value at maturity; amortization typically applies to an insurer’s long-term assets such as bonds, mortgages, and other debt securities. Contrast with depreciation.
analytical phase of IRIS The second phase of the Insurance Regulatory Information System (IRIS) used in the United States to monitor the financial condition of insurers. During this phase, NAIC examiners apply qualitative and quantitative standards to further analyze the Annual Statement data of insurers that had a number of unusual ratios during the first phase of IRIS analysis. See also statistical phase of IRIS.
annual administration charge For fixed deferred annuities, a stated charge in a flat monetary amount, automatically deducted from a customer’s annuity account value each year.
annual percentage rate (APR) The actual yearly cost of borrowing over the term of a loan expressed as a single yearly percentage rate. The APR includes any fees or additional costs associated with the transaction. Also known as effective interest rate.
annual report A financial document that the management of a company sends to interested parties—such as stockholders and investors—to report on the company’s financial performance during the preceding year; helps users assess a company’s profitability and financial strength. Contrast with Annual Statement.
annual reset method For equity indexed annuities, an index-crediting mechanism that involves comparing the value of the index at the start of the contract year with its value at the end of the contract year. The starting value for the next year is reset to the value of the index at the end of the current contract year. The insurer determines the amount of excess interest by averaging the results for each contract year of the contract term. Also known as ratchet method..
Annual Return A document Canadian insurers must file each year with Canadian insurance regulatory authorities that includes detailed accounting and statistical data about the insurer; similar to the Annual Statement required for insurers in the United States.
annual roll-up benefit An enhanced death benefit under which the principal of a variable annuity contract is increased, or “rolled up,” by a specified percent annually and the guaranteed death benefit payable is equal to the greater of (1) the contract’s accumulated value at the time of the contract owner’s death or (2) the rolled-up principal amount.
Annual Statement A financial statement that every insurer in the United States must file with the National Association of Insurance Commissioners (NAIC) and the insurance regulatory organization in each state in which the insurer conducts business; helps regulators assess a company’s solvency. Contrast with annual report.
annual step-up benefit An enhanced death benefit sometimes included in variable annuities that locks in investment gains on each contract anniversary, thus guaranteeing a minimum accumulated value. The death benefit payable under this guarantee is the greater of (1) the actual accumulated value of the contract at the time of the contract owner’s death or (2) the stepped-up value of the contract at the anniversary date.
annually renewable term (ART) insurance See yearly renewable term insurance.
annuitant The person whose lifetime is used to determine the amount of benefits payable under an annuity contract.
annuitization The process of changing from the accumulation period to the payout period of an annuity.
annuitization period See payout period.
annuity In general terms, a series of periodic payments. In the financial services industry, a contract under which an insurer promises to make a series of periodic payments to the contract owner in exchange for a premium or series of premiums. See also deferred annuity and immediate annuity.
annuity certain See period certain annuity.
annuity contract See annuity.
annuity conversion costs For deferred annuities, the costs to the contract owner to obtain a specified dollar amount of periodic income payment. Tables of these costs show the actuarial present value of periodic income payments of a specified amount per period for an annuitant of a specified age and sometimes of a specified gender.
annuity cost The present value of future periodic income payments under an annuity.
annuity date See maturity date.
Annuity Disclosure Model Regulation In the United States, a model act developed by the National Association of Insurance Commissioners (NAIC) that provides prospective purchasers of specified types of annuities with information to help them select an annuity appropriate for their needs.
annuity due A series of equal payments that are made at the beginning of each payment period over a fixed amount of time. Contrast with ordinary annuity.
annuity mortality table A type of mortality table that shows the projected mortality rates and survival rates for a population of annuitants only. Contrast with life insurance mortality table.
annuity period The time span between each of the payments in the series of periodic annuity payments.
annuity purchase costs For immediate annuities, the costs to the contract owner to obtain a specified dollar amount of periodic income payment. Tables of these costs show the actuarial present value of periodic income payments of a specified amount per period for an annuitant of a specified age and sometimes of a specified gender.
annuity reserves Contractual reserves that are calculated at annuity contract issue.
annuity unit A share in an insurer’s separate account during the payout period; obtained by converting accumulation units in various subaccounts before the first annuity payment is made.
antiselection The tendency of individuals who believe they have a greater-than-average likelihood of loss to seek insurance protection to a greater extent than do other individuals. Also known as adverse selection or selection against the insurer.
antitrust laws Laws designed to protect commerce against the monopolization of market power and unlawful restraints of trade, such as price discrimination and price fixing. Known as competition laws in most countries other than the United States.
AOM See Actuarial Opinion and Memorandum.
APL option See automatic premium loan option.
apparent authority According to the principles of agency law, authority that is not expressly given to an agent but that the principal either intentionally or negligently allows a third party to believe the agent possesses. Contrast with actual authority.
app-later issue A new business procedure whereby the insurer receives application information electronically and then prints and sends a paper application, or a confirmation receipt, along with the annuity contract for the contract owner to sign.
app-less issue A new business procedure whereby the insurer issues the annuity contract without ever requiring a signed application or confirmation receipt.
applicant The person or business that applies for an insurance policy.
appointment A written statement issued by a licensed insurer authorizing the holder to act as an agent of the insurer.
appreciation An increase in the value of an investment. Contrast with depreciation.
appropriated surplus See special surplus.
approval premium receipt A conditional premium receipt that provides temporary insurance coverage only when the insurer approves the proposed insured as a standard or better-than-average risk. Contrast with insurability premium receipt. See also conditional premium receipt and binding premium receipt.
APR See annual percentage rate.
APS See Attending Physician's Statement.
arbitration An alternative dispute resolution method in which impartial third parties, known as arbitrators, evaluate the facts in a legal dispute and render a decision that usually is binding on the parties. See also mediation.
arbitration provision A reinsurance agreement provision that requires the reinsurance parties to submit disputes they cannot resolve through negotiation to an arbitration panel rather than to a court of law and that describes the procedures the parties must use to select arbitrators and conduct the arbitration process.
arbitrator An impartial third party who evaluates the facts in a legal dispute and renders a decision that is binding on the parties. See also mediator.
ARM See adjustable rate mortgage.
ART insurance Annually renewable term insurance. See yearly renewable term insurance.
A-share annuity A variable annuity with a front-end load based on the contribution amount. Contrast with B-share annuity, C-share annuity, L-share annuity.
ASO contract See administrative services only contract.
asset accumulation product A product that enables customers to increase the amount and/or value of their assets over time.
asset adequacy analysis A broad actuarial practice undertaken to ensure that the assets backing reserves meet established standards.
asset allocation A process of investing money in predetermined proportions in different types of assets to create a portfolio of assets with the investor’s desired expected return and desired expected risk characteristics.
asset allocation criteria See diversification criteria.
asset allocation fund A type of mutual fund that invests in various asset classes—stocks, bonds, and cash equivalents, such as money market instruments, to maintain precise weightings within each of those asset classes.
asset allocation model A tool that uses an investor’s personal and financial data to generate options for strategically distributing assets among different types and classes of investments.
asset allocation plan A determination or plan outlining into which asset classes investments should be placed.
asset class A group of similar investment instruments linked by related risk and return features. Three common asset classes are stocks, bonds, and money market funds or cash equivalents.
asset concentration risk The risk of the excessive concentration of assets in any single category.
asset distribution products Financial products that enable owners to manage the distribution of assets to ensure that resources are available when needed.
asset fluctuation reserves Non-contractual reserves designed to absorb short-term fluctuations in the gains and losses affecting an insurer’s invested assets. These reserves allow the effects of short-term investment gains and losses to be reflected only gradually in reported capital and surplus.
asset management account (AMA) An account that offers checking services as part of a package of financial services, including a money market deposit account, securities brokerage services, credit and debit cards, loans, and unified record keeping. Also known as a sweep account.
asset management charge See investment management fee.
asset management fee See investment management fee.
asset manager See asset-liability manager.
asset mix The relative shares of different asset types that comprise a given investment portfolio.
asset portfolio In asset-liability management (ALM), the portfolio in which the insurer holds securities and other invested assets. Contrast with liability portfolio.
asset protection product A product that protects owners against the risk of financial loss from unforeseen events such as natural disasters, theft, accidents, illnesses, and death.
asset risk For an insurer, the risk that it will lose money on its investments in stocks, bonds, mortgages, and real estate. One of four officially recognized C risks. Also known as C1 risk.
asset trader An investment professional who is responsible for executing purchases and sales of publicly traded securities.
asset valuation The process of calculating the monetary values for assets.
asset-based commission schedule For annuity sales, a commission schedule in which commissions are calculated as a percentage of the accumulated value of a deferred annuity contract’s funds. Also known as a trail commission schedule. Contrast with deposit-based commission schedule.
asset-liability management (ALM) The practice of coordinating the administration of an insurer’s asset portfolio (its investments) with the administration of its liability portfolio (its obligations to customers) so as to manage risk and still earn an adequate level of return.
asset-liability manager The position within an insurance company responsible for monitoring the investments for a specific line of the insurer’s business and making sure funds are available when needed to support that line. Also known as an asset manager.
assets All the things of value owned by a company, such as cash, financial securities, buildings, furniture, and land. Contrast with liabilities.
assigned surplus See special surplus.
assignee The party to whom property rights are transferred under a legal agreement known as an assignment. Contrast with assignor.
assignment As pertains to insurance, a legal agreement under which a policyowner or contract owner—the assignor—transfers some or all of her ownership rights in an insurance policy or annuity to another party—the assignee. See also absolute assignment, collateral assignment.
assignment provision A life insurance policy or annuity contract provision which describes the roles of the insurer and the policyowner or contract owner when the policy is assigned.
assignor The person who transfers ownership rights in property by means of an assignment. Contrast with assignee.
association examination In the United States, a single financial condition examination of an insurer operating in more than one zone or in more than three states conducted by examiners representing the various states or zones in which the insurer does business.
association group A group that consists of members of an association, such as a teachers’ association or physicians’ association, formed for a purpose other than obtaining insurance coverage.
assumed investment rate (AIR) The rate of return that variable annuity subaccount investments are expected to earn during the accumulation period; used to estimate annuity payments.
assumed mortality The hypothetical or assumed number or rate of deaths in a given cohort, or group of people. Contrast with expected mortality.
assuming company See reinsurer.
assumption certificate An insurance certificate issued to an insurer’s existing policyowners to show that a reinsurer has assumed from the issuing company all of the risk under the policies. See also assumption reinsurance.
assumption reinsurance Reinsurance designed to permanently and entirely transfer blocks of existing insurance business from one company to another. Also known as portfolio reinsurance. Contrast with indemnity reinsurance.
Assumption Reinsurance Model Act In the United States, a model law proposed by the National Association of Insurance Commissioners (NAIC) to regulate the transfer and novation of insurance contracts by way of assumption reinsurance. Defines the rights and responsibilities of policyholders, regulators, and the parties to assumption reinsurance agreements.
assured See insured.
attachment point For stop-loss insurance, the total dollar amount of claims that the employer must pay within a stated period of time before the stop-loss insurer begins to reimburse the employer. Also known as aggregate deductible.
attained age conversion A conversion of a term life insurance policy to a cash value life insurance policy in which the premium rate for the cash value policy is based on the insured’s age at the time the policy is converted. Contrast with original age conversion.
attending physician A physician, whether he is a primary care physician or a specialist, who has provided medical care for a proposed insured. Contrast with examining physician.
Attending Physician's Statement (APS) A report by a physician who has treated or is currently treating a proposed insured that is provided to an insurer during the underwriting process. Also known as a medical attendant’s report (MAR).
audit A systematic examination and evaluation of a company’s records, procedures, and controls.
auditor's opinion A statement, prepared by a public accounting company, that attests that the information contained in an insurer’s annual report fairly represents the insurer’s operations and that the audit was conducted in accordance with applicable auditing standards.
authorized reinsurer In the United States, a reinsurance company that is licensed or otherwise recognized by the insurance department in the jurisdiction of a direct writer. Also known as an admitted reinsurer.
auto-adjudication An electronic claim processing system for processing claims that fit certain parameters specified for electronic handling.
automatic binding limit In an automatic reinsurance arrangement, the maximum monetary amount of risk the reinsurer will accept automatically on a given policy or case without making an independent underwriting assessment.
automatic dividend option A specified policy dividend option that the insurer will apply if a policyowner does not choose an option.
automatic nonforfeiture benefit A specific nonforfeiture benefit that becomes effective automatically when a renewal premium for a cash value life insurance policy is not paid by the end of the grace period and the policyowner has not elected another nonforfeiture option.
automatic portfolio rebalancing A special service whereby the insurer transfers money among subaccounts at specified intervals (such as at the end of each calendar quarter) to maintain the contract owner’s desired investment allocation.
automatic premium loan (APL) option A cash value life insurance policy nonforfeiture option under which the insurer will automatically pay an overdue premium for the policyowner by making a loan against the policy’s cash value as long as the cash value equals or exceeds the amount of the premium due.
automatic reinsurance A type of reinsurance under which the direct writer agrees in advance to cede and the reinsurer agrees in advance to assume all cases that meet the specifications in the reinsurance agreement. Contrast with facultative reinsurance and facultative-obligatory reinsurance.
automobile insurance A type of personal property insurance that protects an insured from financial losses arising from operation of a vehicle.
aviation exclusion provision A life insurance policy provision which states that an insurer will deny payment of policy proceeds if the insured’s death is caused by certain aviation-related activities.




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