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Glossary of Terms

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A-Share Variable Annuity

A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.

Accelerated Death Benefits

A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured's death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.

Accident and Health Insurance

Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.

Actual Cash Value

A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost)

Actuary

An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms' reserves, determines rates and rating methods, and determines other business and financial risks.

Additional Living Expenses

Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

Adjuster

An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.

Admitted Assets

Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company's financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets.)

Admitted Company

An insurance company licensed and authorized to do business in a particular state.

Adverse Selection

The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.