Life

Insurance

A legal contract that transfers an uncertain risk from one party to another.

Indemnify

To compensate or restore an insured to the financial position experienced before a loss.

Nonparticipating Policies

Insurance policies issued by stock insurers where policy owners are not stockholders and do not receive dividends.

Divisible Surplus

The revenue paid out in the form of dividends to policyholders of mutual insurance companies.

Fraternal Benefit Societies

Not-for-profit organizations that provide insurance and are based on a common bond among members.

Risk Retention Group (RRG)

A specialized insurance company that provides liability insurance for individuals and entities with a common bond.

Reinsurers

Insurance companies that provide coverage for other insurance companies.

Ceding Insurer

The primary insurer that transfers excess risk to a reinsurer.

Automatic Reinsurance

Reinsurance where a contract defines criteria for the reinsurer to automatically assume excess risks.

Self-Insurers

Organizations that establish a self-funded plan to cover potential losses.

Authorized Insurer

An insurance company that has received a certificate of authority from a state's insurance department.

Domesticate Insurer

An insurer that is organized and incorporated in the state where it conducts business.

Agent

An individual authorized to represent an insurer's interests.

Adverse Selection

The tendency for higher-risk individuals to seek insurance more frequently than lower-risk individuals.

Moral Hazard

Increased risk of loss due to dishonest behavior of the insured.

Indemnity Contract

A contract designed to restore the insured to their original financial position following a loss.

Principle of Indemnification

Concept that the insured should not profit from an insurance claim.

Loss Exposure

The risk of financial loss that a person or organization may face.

Hazard

A condition that increases the likelihood that a loss will occur.

Insurable Interest

A financial stake in something that justifies an insurance policy.

Void Contract

An agreement that has no legal effect because one of the essential elements is missing.

Breach of Contract

A violation of any of the agreed-upon terms and conditions of a contract.

Waiver

The voluntary relinquishment of a known right.

Policy Rider

An addition to an insurance policy that changes the terms of the policy.

Standard Risks

Individuals with an average potential for loss as classified by insurance companies.