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Cancellation
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The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.
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Capacity
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The amount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific perils.
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Capital Retention Approach
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A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.
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Capital Stock and Surplus
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Represents the excess of a company's assets over its liabilities as reported in its financial statements. Stock companies have capital stock and surplus. Capital stock represents funds paid into the company by stockholders. Surplus represents the remaining excess of assets over liabilities. Mutual companies only have surplus since there are no stockholders in a mutual company.
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Captive Agent
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Representative of a single insurer or fleet of insurers, who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive range of employee benefits such as pensions, life insurance, health insurance and credit unions.
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Carrier
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The underwriting insurance company.
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Cash Surrender Value
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The amount that is available in cash for loans and that may be available for withdrawals. Accessing Cash Surrender Value may reduce the death benefit and may increase the risk of lapse. Please note that the cash value only pertains to permanent life insurance and not term life insurance.
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Cash Value Life Insurance
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A life insurance policy which in addition to providing a benefit upon the death of the policy holder, also accumulates cash value over time enabling benefits to be paid out before death.
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Cede
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To transfer risk from a direct insurer to his reinsurer.
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Ceding Insurer
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One who cedes a risk to his re insurers or retrocessionaries.
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Cession
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Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation.
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Change of Beneficiary Form
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A form provided by the insurer that the policyowner must complete in order to change the beneficiary on a policy.
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Chartered Life Underwriter (CLU)
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An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.
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Child Rider
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Rider which provides insurance to the insured's child(ren).
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Claim
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A request for payment of a loss which may come under the terms of an insurance contract.
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Claimant
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A first or third party who asserts right of recovery.
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Claims Notification Clause
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A clause in a policy which provides for prompt notification of claims and commonly designates a specific adjuster to receive notice and deal with the claim.
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Collateral Assignment
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A temporary transfer of some, but not all, policy rights to a lender to provide security for a loan.
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Combined Ratio
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A measure of the dollars spent for claims and expenses and premium dollars taken in. The total of two separate ratios: (1) incurred loss ratio, the ratio of losses incurred expressed as a percentage of the net Earned Premium, and (2) expense ratio, the ratio of expenses incurred expressed as a percentage of the net Earned Premium. Attention: in some cases the denominator of the expense ratio is expressed as a percentage of the written premium. In addition the allocation of some components as loss adjustment expenses and management costs is not always clear.
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Commission
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The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.
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Commissioner
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A state officer who administers the state's insurance laws and regulations. In some states, this regulator is called the director or superintendent of insurance.
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Concealment
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Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.
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Conditional Receipt
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A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.
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Conservation
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The attempt by the insurer to prevent the lapse of a policy.
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Consideration
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One of the elements for a binding contract. Consideration is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policy holder in the application.
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Contest, policy
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A court action challenging the validity of a policy.
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Contingent Owner
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The person to succeed as owner of a life insurance policy if the original owner dies.
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Contract
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A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.
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Contract Law
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The portion of civil law that interprets written agreements between parties and resolves disputes between them.
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Contribution Principle
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The principle under which divisible surplus is distributed among policies in the same proportion as the policies are considered to have contributed to that surplus.
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Conversion Privilege
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A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability.
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Convertible Term Insurance
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Term insurance which can be exchanged, at the option of the policy holder and without evidence of insurability, for another plan of insurance. Also known as credit life insurance. The premium rate for the permanent policy is normally based on the age of the insured at the time of the conversion.
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Cost Basis
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An amount attributed to an asset for income tax purposes; used to determine gain or loss on a life insurance contract to determine the value of a gift.
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Cost of pure risk
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All costs related to pure risk which include, from the perspective of shareholders, retained risk, loss prevention costs and insurance costs.
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Cost-of-Living Rider
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Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
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Coverage
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The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
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Cross liability clause
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Obligates an insurer to protect each insured separately.
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Cross Purchase Agreement
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Specifies the terms for the surviving partners or shareholders to buy a deceased's share of the business's ownership.
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Cumulative Premium
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The total amount paid over the course of a specified amount of years.
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Current Assumption Whole Life Insurance
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Nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.
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Current with Reentry Premiums
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Non-guaranteed premiums at the time of re-entry; applicable to certain term life insurance policies.
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Customer Service Representative (CSR)
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Customer service representatives support the work of insurance agents with a variety of tasks that must be done within a company or agency to deliver services to and handle requests from clients.
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Cut-through endorsement
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An endorsement to an insurance contract stating that reinsurance proceeds will be paid directly to the named payee in the event of an insurer's insolvency.
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