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Glossary of Insurance Terms
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- Rate: The pricing factor upon which
the insurance buyer's premium is based.
- Rated Policy: An insurance policy
issued at a higher-than-standard premium rate
to cover a higher-than-standard risk; for
example, an insured who has impaired health or
a hazardous occupation.
- Ratemaking: The statistical process
by which insurers determine probability of
loss and pricing for the basic classes of
insurance.
- Rating Territory: A geographical
grouping in which like hazards tend to
equalize and permit the establishment of an
equitable rate for the territory.
- Reasonable and Customary Charge: A
charge for health care which is consistent
with the going rate or charge in a certain
geographical area for identical or similar
services.
- Rebating: Giving any valuable
consideration, usually all or part of the
commission, to the prospect or insured as an
inducement to buy or renew. Rebating is
illegal.
- Recurring Claim Provision: A
provision in some health insurance policies
which specifies a length of time during which
the recurrence of a condition is considered to
be a continuation of a previous period of
disability or hospital confinement.
- Recurring Clause: A provision in
some health insurance policies, which
specifies a period of time during which the
recurrence of a condition is considered a
continuation of a prior period of disability
or hospital confinement.
- Reduced Paid-up Insurance: A form
of insurance available as a non-forfeiture
option. It provides for continuation of the
original insurance plan, but for a reduced
amount.
- Regulation: Supervision of business
practices by a governmental entity. Regulation
of insurance companies is through respective
state insurance commissioners.
- Rehabilitation: (1) Restoration of
a totally disabled person to a meaningful
occupation, (2) a provision in some long- term
disability policies that provides for
continuation of benefits or other financial
assistance while a totally disabled insured is
retraining or attempting to resume productive
employment.
- Reimbursement: The payment of the
expenses actually incurred as a result of an
accident or sickness, but not to exceed any
amount specified in the policy.
- Reinstatement: The resumption of
coverage under a policy which has lapsed.
- Reinsurance: The acceptance by one
or more insurers, called re-insurers,
of a portion of the risk accepted by another
insurer who has contracted for the entire
coverage. Reinsurance can be treaty or
facultative.
- Reinsurance Facility: An
alternative mechanism to service those
insureds that cannot obtain insurance in the
voluntary market. Premiums and losses for the
business that is ceded to the facility are
pooled and all insurers share according to
their proportion of the voluntary market. See
also Residual Market.
- Renewable Term Insurance: Term
insurance which can be renewed at the end of
the term, at the option of the policyholder
and without evidence of insurability, for a
limited number of successive terms. The rates
increase at each renewal as the age of the
insured increases.
- Renewal: Continuance of coverage
under a policy beyond its original term by the
insurer's acceptance of the premium for a new
policy term.
- Rent Insurance: A form of business
interruption insurance for a landlord,
designed to protect building owners against
loss of income when rentals have been
interrupted or rental value has been impaired
by the occurrence of any of the insured
perils. It assures continuous income while an
insured's building is un-tenantable.
- Renter's Policy: A package type of
insurance that includes coverage similar to a
homeowners policy to cover the personal
property of a renter or tenant in a building.
- Replacement: The substitution of
health insurance coverage from one policy
contract to another.
- Replacement Cost: The cost to
repair or replace property at construction
costs prevailing at time of loss; the cost to
repair or rebuild property without considering
depreciation. Contrast Actual Cash Value.
- Replacement Cost Insurance:
Insurance designed to provide coverage on the
basis of full replacement cost without
deduction for depreciation on any loss
sustained, subject to the terms of the
co-insurance clause. This coverage applies to
both building and contents items as specified
on the face of the policy. No deduction is
taken for depreciation in arriving at the
proper amount of insurance needed to comply
with the coinsurance clause.
- Replacement Ratio: The percentage
of income before retirement that is required
to be replaced to maintain the same standard
of living after retirement.
- Representation: Statements made by
an applicant in an insurance application,
which he represents as being substantially
true to the best of his knowledge and belief,
but which are not warranted as exact in every
detail.
- Rescission: Termination of an
insurance contract by the insurer on the
grounds of material misstatement on the
application for insurance. The action of
rescission must take place within the
contestable period or Time Limit on Certain
Defenses clause set forth in the policy, but
takes effect as of the effective date of the
policy, thus voiding the contract from its
inception.
- Reservation of Rights: An
arrangement whereby an insurer defends a case
without commitment to provide coverage in the
event that the facts disclosed during the
trial reveal that the occurrence is not
covered.
- Reserve: (1) An amount representing
an insurer's estimate of its liabilities on
future commitments under policies outstanding.
(2) An amount allocated for a special purpose.
- Residual Disability: A period of
partial disability that immediately follows a
period of total disability. Benefits for
residual disability are paid on a pro-rata
basis, depending on the percentage of earnings
loss.
- Residual Disability Benefits: A
provision in an insurance policy that provides
benefits in proportion to a reduction of
earnings as a result of disability, as opposed
to the inability to work full-time.
- Residual Market: A source of
insurance available to applicants who are
unable to obtain insurance through ordinary
methods in the voluntary market. (See
Automobile Insurance Plan, Joint Underwriting
Association).
- Retention: The net amount of risk
retained by an insurance company for its own
account or that of specified others, and not
reinsured.
- Retrocession: The process by which
a re-insurer obtains
reinsurance from another company.
- Retrospective Date: The first date
for which claims will be paid under a
claims-made policy of liability insurance.
- Retrospective Rating: Rating
procedure which allows adjustment of an
insured's final rate on the basis of the
insured's own loss experience.
- Revocable Trust: A trust that can
be terminated or revoked by its creator.
- Rider: A document that modifies an
insurance policy. It may increase or decrease
benefits, waive a condition or coverage, or in
any other way amend the original contract. See
Endorsement.
- Right of Survivorship: Legal rule
which states that at the death of one co-owner
of property, that person's interest in the
property automatically passes to the surviving
joint tenant or tenants.
- Risk: (1) The chance of loss; (2)
The insured or property covered by a policy or
application.
- Risk Classification: The process by
which a company decides how its premium rates
for life insurance should differ according to
the risk characteristics of individuals
insured (e.g., age, occupation, sex, state of
health) and then applies the resulting rules
to individual applications. (See also
Underwriting)
- Risk control: Any conscious action
(or decision not to act) intended to reduce
the frequency, severity, or unpredictability
of accidental losses.
- Risk Retention Group: An
alternative form of insurance in which members
of a similar profession or business band
together to self insure their risks.
- Robbery: The taking of property
from a person by force or threat of violence.
- Rollover: Transfer of IRA or other
qualified pension funds from one financial
institution to another.
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