Click on a term to see its definition: C

Lost in the terminology insurance companies use? Our quick-reference insurance glossary provides easy-to-understand definitions and examples of the terms insurance professionals use.

Capacity

Capacity refers to the supply of insurance that is there to meet the market demand. All in all, it refers to the extent that the insurance industry has in the way of its ability to accept risk. Insurance companies should have enough capital in relation to its risk exposure, since this is an indicator of solvency, or the company's ability to pay off claims.

Insurance companies cannot just accept all insurance applications. It must first maintain a level of capital and policyholder surplus in order for it to accept additional risk exposure.

When a catastrophic event or a major calamity occurs, capacity is considerably reduced. Such is what happened after the 9/11 World Trade Center terrorist attack. However, capacity can be restored by raising more capital, increasing net income and passing on more of the risk to other reinsurers.

When the capacity is high, premiums tend to decline. However, with reduced capacity, the insurance companies may be forced to raise rates, tighten limits and conditions in order to improve its profitability.

Capital

Capital refers to shareholder's equity or retained earnings. This is an important asset for insurance companies, as their stability and solvency are measured by its capital surplus. Capital surplus is computed by getting the difference of its assets and its liabilities. The capital is also the asset protecting the benefits of the policyowners especially in times when the company develops financial problems.

Capital may also include good bought for use in production, working capital (which is the difference between the company's current assets and liabilities) and long term assets (which are used in the production of the company's products and includes the land, building, machinery and equipment). Capital also refers to the equity interest of the different stock holders.

Capital Markets

Capital Markets are the venue by which debt and equities are traded.

It refers to the financial market that connects investors and savers with borrowers and investees. These mainly trade in long-term debt and financial instruments such as stocks, notes and bonds. Depository institutions (such as insurance companies, banks, and credit unions) as well as savers provide the capital for borrowers and use securities to guarantee the payment of their principal plus the interest. Brokers and dealers facilitate in the trading of securities.

The capital market is made up of the money market, the stock market and the bond market. It is highly decentralized.

Examples of capital markets are the New York Stock Exchange, the American Stock Exchange and the regional stock exchanges.

Captive Agent

A Captive Agent is an insurance company agent that exclusively sells the products of only one insurance company. There is an agreement binding the captive agent and restricting him from writing other insurance policies from any other company, except if the agent's captive company was the one who released the agent.

The advantage of working with a captive agent is that the agent has a tendency to be more knowledgeable about the products, as contrasted with an independent agent, who is allowed to sell policies from various insurance companies.

Captive agents earn by commissions, or by a combination of salary and commissions from the premiums of the policies they sell. Captive agents are also usually given an allowance for office expenses and may receive benefits similar to that offered to employees. This may include life insurance, health insurance and pensions.

Captives

Captives or captive insurance companies are companies that were established by one or more companies with the purpose of providing these companies with insurance coverage. In some cases, they even cover the risks of the customers of these companies as well. It is a method of self-insurance and risk management technique.

There are different kinds of captive insurance companies. It may be a single parent captive (where the insurance covers the risk of its parent and affiliates), an association captive (where the insurance covers the risk of a trade group or an industry group) and an agency captive (where it reinsures the risks of the clients of the insurance agency or brokerage firm). Other kinds of captive company are the group captive (which is jointly owned by more than one company) and a rent-a-captive (which provides its services to others for a fee).

Car Year

The Car Year is a standard method of measurement of the length of time for the coverage of the automobile insurance. This is equivalent to 365 days of insurance coverage for a specified automobile. Knowing the car year will help the insured person know when coverage for his car will end and when he needs to renew his insurance or else look for another insurance provider.

A Car Year is the common length of time for the coverage for automobile insurance. However, there are times when an automobile insurance policy may cover a period less than one year. You can usually have your car insured for either half a year or a whole year.

Case Management

Case Management refers to the system by which medical services are coordinated. It has three objectives - to treat the patient and provide him with what he needs, to improve the quality of the medical services provided; while at the same time reduce cost. The person coordinating the services is called a case manager.

A service or case plan is developed to fit the needs of the individual. The case manager works closely with the patient, as well as the service providers. The case manager tries to fit in the preferences and choices of the clients so that the treatment is developed in a way that empowers the patient.

The service includes case screening, risk management or the assessment of the risk, programming of the services, monitoring of the services, implementing the service arrangement as well as providing advocacy towards improved service.

Cash Dividend Option

The Cash Dividend Option is an option given to those who have participating insurance policies. This choice means that the policy owner stands to receive regular check payments for the policy dividends.

The face value of the policy, as well as the premium payments required, remain the same.

There are also other options that a policy owner can choose. This includes the option to apply the dividends in order to reduce payment premiums, the option to leave the dividends with the insurer so that it can earn interest, the option of buy additional paid-up life insurance, as well as the option to buy one-year extended term life insurance.

Cash Payment Option

The Cash Payment Option is an option which allows owners of life insurance policies and selected annuity contracts to surrender the policy or the contract in exchange of the cash surrender value. This amount is paid as a lump sum. This amount is usually more than the premiums you paid.

This is also called the cash surrender option.

What the policy owner should note, however, is that opting to surrender the policy in exchange for cash has additional costs. Since you are older than when you bought the original policy, buying a new policy to replace the old one will cost you more in premiums. There should also be tax penalties for surrendering the policy.

Cash Surrender Value

The Cash Surrender Value is the amount that the policy owner or annuity owner stands to receive if he surrenders his permanent life insurance policy or annuity contract. Adjustments such as policy loans, tax penalties and so on are deducted from the amount.

For life insurance policy, this is a non-forfeiture option so that even when a policyowner stops paying for his policy for whatever reason, he still is able to get something back - his premium payments are not totally forfeited in favor of the insurance company.

For annuities, the cash surrender value is equal to the accumulated value of the annuity, less any charges, such as surrender charges and tax penalties.

Cash Value

The Cash Value (which is also known as the Cash Surrender Value) is the amount that the policy owner gets to receive when he cancels his life insurance policy. The Cash Value also refers to the amount the insurer has to return to the annuity owner when he surrenders the annuity before the payments become due.

Deductions such as policy loans and surrender penalties or charges are also computed to get the cash value.

For life insurance policies, the cost of surrendering the policy also includes the fact that premiums will be higher if the policy owner wants to buy a new policy for himself. A new contestability period will also apply to the new policy.

Catastrophe

Catastrophe refers to term that is used regarding a single incident or a succession of related incidents that cause massive losses to insured property, the amount of which reaches by the millions of dollars. This term is used for purposes of statistical recording. The insurance industry has pegged a specific amount, that is, a dollar threshold (currently at $25 million) that is reached or breached because of a disaster. A catastrophe also involves losses for a considerable number of insurance companies.

A catastrophe may be a natural or man-made disaster. Examples are the hurricane Katrina and the terrorism attack on 9/11 at the World Trade Center. Catastrophes include hurricanes, tornadoes, wildfire or forest fires, and acts of terrorism.

Catastrophe Bonds

Catastrophe bonds are risk-based securities that are high-yield debt instruments. These pay high interest rates since it is based on risk. These catastrophe bonds enable insurance companies to raise money to pay for losses after a catastrophe such as an earthquake or hurricane. The risk is spread as it is sold as bonds to institution investors.

The condition surrounded by the catastrophe bonds is that if the bond issuer suffers loss because of a catastrophe that has been previously specified, then payments of the interest and sometimes even the principal may be completely forgiven or deferred. Thus, they are similar to floating rate bonds, as the principal may also be lost because of a specified catastrophe.

Catastrophe Bonds or CAT bonds provide an attractive return as compared to other alternative investments.

Catastrophe Deductible

The Catastrophe deductible is an amount or percentage that the homeowner must pay before he is able to receive claim payments because of a major natural disaster.  Deductibles, which are usually large, enable the insurance company to accept more applications for property insurance, since it limits its potential losses. This is applicable for losses incurred due to a covered catastrophe.

The catastrophe deductible is also called the wind deductible.

The insurance company needs the deductible since it can only reinsure when it is able to keep the potential maximum losses at a certain level.

The amount and percentage of deductible vary from one insurance company to another.

Catastrophe Factor

The Catastrophe Factor refers to the possibility or the probability of losses due to a catastrophe. The factor is based on the historical experience with catastrophes and looks into the total number of such catastrophes in a specific location (such as a state) within the last 4 decades. The catastrophe factor is important in calculating for the premiums of property insurance.

There are some that look at the catastrophe factor only within 2 decades. This really depends on the insurance company and how the actuarial team computes for the insurance premiums.

These catastrophes (depending on the definition stated in the insurance contract) may include hail, riots, explosions, fire, earthquakes and windstorms.

Catastrophe Model

The Catastrophe Model is a complicated and often computer-generated simulation model that is used to show the potential costs of a certain catastrophe. The cost is computed over a certain geographical location and uses pertinent information such as current demographics and the number of buildings in place.

The Catastrophe Model provides the insurance company with hypothetical loss data that goes as far as thousands of years. This will help in determining premiums for property insurance.

There are three catastrophe models that can be used: 1) the Damage or Engineering Module (which looks into the potential damage vulnerability of a specific structure; 2) the Hazard Module (which looks at the characteristics of natural hazards and the probability that these will happen) and 2) the Financial Module (which tries to compute for the financial losses in a catastrophe).

Catastrophe Reinsurance

Catastrophe Reinsurance is about reinsurance for losses caused by a catastrophe. The insurance industry has the capacity to receive more property insurance policies because it is able to spread the risk among the many reinsurance companies. That means that the insurance company does not pay for all the claims filed because of losses causes by a catastrophe such as an earthquake, a tsunami, a terrorist attack and a hurricane.

The reinsurers share the risk with the insurance company.

However, premiums for property insurance as well as reinsurance rise considerably after a catastrophe. This is because the number of claims has depleted the capital of insurers and reinsurers. But because the risk is spread out through reinsurance, the insurance company does not experience that heavy and great a loss than when it pays for the losses all on its own.

Cell Phone Insurance

Cell Phone Insurance enables the cell phone owner to enjoy protection from damage or theft of his cell phone. Most of the time, cell phone insurance is sold when the cell phone themselves are sold.

Of course, cell phones come with a warranty from the manufacturers. However, the warranty only pays for malfunction and defects that result in equipment failure. If the phone is stolen, lost or if you drop it and damage it, the warranty will not pay to replace the phone.

Cell phone insurance helps to get a replacement if something happens to the phone.

When claiming for a replacement cell phone, there is a deductible to be paid.

Chartered Financial Consultant (ChFC)

A Chartered Financial Consultant or ChFC is a person who has completed the necessary courses and requirements in financial planning to enable the person to serve and provide clients with financial planning services. The courses that a person has to pass in order to be a ChFC include income taxation, investments, individual insurance benefits and financial statement analysis. He should also be well-versed in financial services, estate planning, gift tax planning and financial and estate planning tools and applications. It is also expected that the consultant has obtained practical experience and a formal education.

The Chartered Financial Consultant as a designation was given first by the American College in Bryn Mawr, Pennsylvania.

Chartered Life Underwriter (CLU)

A Chartered Life Underwriter is a professional who has passed examinations on taxation, insurance and investments. He should also have planning experience with regards to life insurance. The CLU has to undergo ten courses, 3 years of relevant and qualifying experience as well as the knowledge and obedience to the code of ethics as provided to the CLUs. The courses aim to provide in-depth training that is concentrated on life insurance and personal insurance planning. There is also an exam after the end of the courses.

The Chartered Life Underwriter as a designation was given first by the American College in Bryn Mawr, Pennsylvania.

Chartered Property/Casualty Underwriter (CPCU)

A Chartered Property/Casualty Underwriter (CPCU) is a professional who has undergone extensive training and passed the national examinations. To be a CPCU, one also has to have three years of work experience. This is a highly respected position in the insurance industry, very much like the accounting industry's Certified Public Accountant. This professional designation is granted by the American Institute for Chartered Property Casualty Underwriters. A professional who is designated to be a CPCU is expected to comply with a code of professional ethics.

The course involves subjects such as history, contracts, insurance law, risk management, business courses (ethics, finance and corporate structure) and rate making. These are post-secondary undergraduate level or graduate-level courses.

Claims Made Policy

A Claims Made Policy is a policy that protects the insured by asserting that any claims made must be made within the policy period or within the extended reporting period (whichever is applicable). This limits the exposure of liability insurers to liabilities in the future.

For Claims Made Policy, the insurer who covers the period when you first knew or was given notice about a lawsuit filed against you is the insurer who will defend and settle the claim.

For example, you are notified of a lawsuit for negligence by a customer whom you treated five years ago. You realize that you have switched insurance companies several times in the last five years. The question would be who would pay for the claims - the insurer who covered the period when the alleged negligence happened? According to the Claims Made Policy, the insurer who covers your risk at the time that you were notified about the lawsuit is the one responsible if there are any claims to be settled.

COBRA

COBRA, which is an abbreviation for Consolidated Omnibus Budget Reconciliation Act is a law that allows you to continue your company health plan even if you leave that company and become employed in another company. For whatever reason, if you decide to leave the company, you can still enjoy the health insurance coverage for the next 18 months.

This is to protect you even as you look for another job and become a beneficiary of another health policy.

There are certain qualifying events under COBRA that provide the patient with continued insurance coverage:

  • the termination of the employee due to strike, resignation, medical leave or layoff
  • the death of the employee covered by the policy
  • the patient's divorce from the covered employee
  • the covered employee's child has passed the age limit for coverage

After the insurance has been transferred to the employee, it is his responsibility to pay for the premiums.

Coinsurance

Coinsurance is an agreement between the insurer and the policyholder that the policyholder share part of the risk. This requires the policyholder to pay a certain percentage of a benefit or claim before he will receive the full payment on the loss. Coinsurance is usually added as a clause to health insurance policies and property insurance policies.

For example, for a health insurance policy that has a 20% coinsurance clause, the policyholder will pay the deductible and 20% of the covered losses. Then the insurance company will pay 80% of the losses up to a specified limit. Then, when this limit is used up, the insurance company will start paying 100% of the losses.

Collateral

Collateral is the asset or property that you provide in order to secure a loan. This asset may be seized and becomes the property of the lender when the borrower fails to pay the loan. In most cases, lenders do not give out the loan unless you have collateral to back it up. This makes a loan a secured loan.

There are times when the loan being secured is for the collateral being assigned. This is true for home mortgage loans (where the borrower tries to get money to buy a house and uses that house as collateral) as well as in businesses (where the borrower uses his accounts receivable and business inventory as collateral). This is what is called asset-based lending.

Collateral is also called security.

Collateral Assignment

Collateral Assignment temporarily transfers a portion of the ownership rights of a life insurance policy or annuity contract. The life insurance policy or annuity contract is used as collateral in order to secure a loan. The borrower which is the owner of the annuity or policy signs off the asset to a creditor. Once the loan is fully paid up, the full ownership reverts back to the policy or annuity owner.

This protects the creditor from the death of the borrower. In the event of the borrower's death before the loan is paid, a portion of the death benefit of the policy or the cash surrender value of the annuity is paid to the creditor. The amount is equal to the balance of the outstanding loan. The beneficiaries of the borrower then get the rest of the benefits.

Collateral Source Rule

Collateral Source Rule is a rule of evidence which prevents the plaintiff from using the claims paid by insurance companies as evidence that part of the victim's damages has already been paid.

For example, in a lawsuit on personal injury, the one being accused cannot show paid medical bills (that were paid by medical insurance) as proof that payment has been made for part of the damages being paid against him. When the court awards the complainant with a specified amount in damages (for issues such as accident, illness, injury and sickness), the plaintiff cannot use other financial sources such as Disability Income Insurance, Workers' Compensation and Health Insurance.

Collision Coverage

Collision coverage is that part of the auto insurance policy that pays for any damages on the car after a collision or car accident. This usually pays to repair the car or to replace it with a car of similar make and value. This payment is made whether it was the driver of the insured car or another person who caused the accident.

With collision coverage, the policyowner pays for a deductible and may also be required by the insurance company to get a new car loan.

This part of the auto insurance coverage is usually optional in most states.

Combined Ratio

Combined Ratio refers to the percentage of premium to claims and expenses. This is one way that an insurance company measures its profitability. When the combined ratio on a policy or client is less that 100%, this means that the company makes an underwriting profit on that certain policy. If the ratio is more than 100%, it means that the company is paying more money for claims as opposed to the money it receives for premiums.

The combined ratio is calculated by getting the sum of the incurred losses and expenses and dividing this by the earned premium.

This ratio reflects the profitability of an account, something which is earned through managing the claims and account well. It does not include income made in investments.

Commercial General Liability Insurance (CGL)

A Commercial General Liability Insurance or CGL is a commercial policy that protects from any and all liability that may arise in the course of doing business. This coverage is only applicable to liabilities that are not specifically excluded in the policy contract.

The coverage includes protection against liability from product failure, accidents and injuries during operations and in the business premises, completed operations and liabilities from independent contractors.

The Commercial General Liability Insurance usually has set limits for general liability, products and completed operations liability, medical payments, advertising and personal liability, as well as fire legal ability. There is also an aggregate limit for all claims to be paid for a year. When that limit for the year is reached, there will be no claims payments for the rest of that year.

Commercial Lines

Commercial Lines are products that are designed for and purchased by a business. This is insurance coverage for businesses, as well as professional organization and commercial institutions. These products are created by the insurance companies to cater to the needs of businesses, which is quite different from personal insurance needs.

The major coverages provided by Commercial Lines Insurance include comprehensive general liability, fire and allied lines, business income, boiler and machinery, inland marine, product liability, surety and fidelity, workers' compensation, directors and officers liability and medical malpractice liability. The business owner can also opt to purchase these coverages under a separate policy, except for business income, which is an add-on to a fire insurance policy.

Commercial Multiple Peril Policy

Commercial Multiple Peril Policy provides protection for a wide range of risks that a commercial establishment or business may face. It is an insurance package that usually includes boiler and machinery, crime, property and general liability.

The Commercial Multiple Peril Policy aims to protect the business not just from loss but also from any liability. Some of the coverages that may be included in the package will be All Risk Property, Standard Multiple Peril and Business Owners Protection.

Thus, the business owner is covered for losses to physical assets because of accident, negligence or malfunction. The business is also covered for actions of the employees or the owners themselves that result in lawsuits or claims from an injured party.

Commercial Paper

A Commercial Paper is an unsecured debt instrument with a short-term duration. It is a discounted promissory note, the discount of which reflects the current market's interest rates. It is usually made for financing of inventories, accounts receivable, as well as a business' short-term liabilities. Commercial papers are usually issued by financial companies and commercial firms.

The maturity of these papers usually doesn't exceed 270 days.

When buying commercial paper, please take not that it is not usually backed by any collateral. It is best to check the issuing firm's debt ratings to ensure that your investment is not at risk.

Commission

The Commission is the insurance agent's or broker's fee for selling a policy. The agent or broker receives a portion of the policy premium as commission and he is expected to serve the needs of the clients even after the purchase of the insurance policy.

Commissions will vary depending on the type of insurance product being bought. Commission rates may also vary from one insurance company to another. The agent receives the biggest commission from the policy's premium for the first year. After that, the commission he gets on the yearly premiums is at a much smaller percentage. Sometimes, though, the commissions are only for the first year premium.

Community Rating Laws

Community Rating Laws are laws that are enacted in several states and decree that all health insurance applicants are charged the same premium. The applicant's age, gender and health are not factors that are used to determine the premium for the health insurance. Everyone pays the same prince for the same benefits package since premiums are based on the demographic and health profile of that state or region.

Community Rating Laws are applied only to health insurance and not on any other insurance product. For other insurance products, say life insurance - health and age play an important factor in pricing. For auto insurance, drivers with bad driving records are made to pay higher premiums.

Commutative Contract

A Commutative Contract refers to an agreement where each party gives and receives something of the same value. Both parties give items or services in exchange for payment or corresponding items or services which they both think have the same value. This is true for most products sold.

For example, Johnny sells a car to Sam. They both agree on a price. Johnny signs over the ownership of the car to Sam when Sam pays for it. The contract of the sale is a commutative contract. This is different from an aleatory contract, where one party pays for a promise or a guarantee.

Competitive Replacement Parts

Competitive Replacement Parts are parts produced by a company other than the original manufacturer of the vehicle. These parts, since they are not produced by the company that produced the vehicle, are much cheaper.

The use of Competitive Replacement Parts in the repair of an insured vehicle is one way those insurance companies keep vehicle repair costs down. In turn, premiums are kept at low and reasonable rates. However, there have been a number of class action suits and legal battles that have arisen because of the use of such parts.

These replacement parts usually include hoods, bumper grilles and covers and fenders - parts that are usually damaged in a collision.

These are also known as competitive auto replacement, generic auto parts.

Competitive State Fund

A Competitive State Fund is a state-established facility that competes with private insurers by selling workers' compensation. This workers' compensation are written for risks that are too great that private insurance companies would rather not cover it or would cover it for a very high premium, so high that the persons to be covered could hardly afford it.

The workers' compensation being written by a Competitive State Fund is designed for the needs of the workers in a specific state and the coverage is only for those who live in that state. There is usually no out-of-state coverage for this kind of funds.

Some states that offer a Competitive State Fund are Louisiana, Utah, Arizona, Hawaii, Kentucky, Maine, Idaho, Montano, New York, Oklahoma, New Mexico, Oregon, Rhode Island, Pennsylvania, Texas, Minnesota, Maryland, Colorado and Missouri.

Complaint Ratio

The complaint ratio is a measure that is used to keep track of customer complaints made against insurance companies. This ratio is commonly used by the state insurance commission or by some state insurance departments to know the extent and number of such customer complaints.

The Complaint Ratio gives the number of customer complaints versus the amount of premiums written. For example, a complaint ratio of 4.50 means that the company has incurred 4.5 complaints for every $1 million worth of total business.

There are also states which include complaints made by medical providers regarding an insurance company's promptness in payment for services rendered.

The Complaint Ratio is one of the measures that indicate to state insurance departments that an insurance company may be up for review and may need closer regulation.

Completed Operations Coverage

Completed Operations Coverage provides the business owner with protection against liability due to property damage or bodily injury for a completed job. This primarily protects businesses that provide a service from claims that may be made by their customers.

For example, a contractor builds a house for his client. Several months later, a portion of the roof falls down and causes injury to the client. Upon investigation, it was discovered that the contractor failed to properly attach some roofing materials that caused a portion of it to collapse. The client may sue for damages that he incurred because of a completed product that the contractor provided.

The coverage has the condition that the damage or injury must happen in another place aside from the business owner's place of business. The only exception to this is that the business involves the sale and distribution of the product to be used or eaten within the premises (like in a restaurant).

Comprehensive Coverage

Comprehensive Coverage refers to a part of the auto insurance that pays for damages to the car that does not necessarily involve other vehicles or other drivers. The damage may be caused by stationary objects.

This coverage will pay for claims you made because your car is damaged by an act of vandalism and theft, by a natural disaster (such as a storm), by a passive object (such as a post that fell into the car). Other possible causes include damage caused by a broken windshield or window and damage because the car collided with an animal or a tree.

The comprehensive coverage is usually optional, something which you can add on to your auto insurance package.

Compulsory Auto Insurance

Compulsory Auto Insurance, from its name, means that the state requires all vehicles to get insurance for that vehicle to be legally driven on the roads. It states the minimum amount of auto liability insurance you need to get. In the event of an accident, the driver is required to show proof of their ability to pay the damages equal to or more than the minimum prescribed by the state.

The state requires this in order to ensure that you are able to pay for car repairs, compensation for damage and medical bills if you are the one who caused the accident.

Contestable Period

The Contestable Period refers to the period where the insurance company still has the right to cancel or withdraw an insurance policy if it is discovered that there was misrepresentation of key facts. These key facts would have caused the company to refuse or deny the application. The Contestable Period also gives the insurance company the right to deny any claims in this case. For example, if an insured person dies because of a critical illness that he concealed at the time he was applying for insurance and he dies within the contestable period, the insurance company can contest the claim and refuse to pay it.

There may also be special provisions, such as a suicide clause, where the insurance policy will not pay for death benefits if the insured person commits suicide within the contestable period. The contestable period is usually two years but there are states that have a one-year suicide clause.

Contingent Beneficiary

The Contingent Beneficiary is the person or legal entity that stands to get the proceeds of a life insurance policy (particularly the death benefits) if the primary beneficiaries die before the insured person or are unwilling or unable to receive the benefits.

The contingent beneficiary helps to ensure that a loved one is provided for in the event of the death of an individual. For example, a parent may name his spouse as his primary beneficiary and his children as his contingent beneficiaries. Then, in the event when they die at the same time, or when the spouse dies before the insured, the children will receive the death benefit.

This is also called a secondary beneficiary. There may be more than one contingent beneficiary. In some insurance companies, you may even be allowed to set the order of succession or the percentage of the benefit that will be received by each contingent beneficiary.

Contingent Liability

A Contingent Liability refers to the liability a business (a partnership or corporation) may face because of accidents and other acts caused by other people besides the employees. The Contingent Liability is what the company is expected to pay in the event that there is damage. This is a way for the company to prepare and see whether it is able to meet their liability obligations.

However, contingent liability is not just limited to payments to be made in a lawsuit. You can also use this to compute for financial obligations for company events such as a product launch, or the launch of a new division. In this case, the contingent liability will be the amount the company needs to pay its vendors and suppliers for raw materials and other services.

Convertible Term Insurance Policy

A Convertible Term Insurance Policy is a kind of term life insurance that gives the policy owner the option of shifting into a permanent life insurance plan (also called a whole life insurance plan).

There are certain conditions to be met before the term insurance is converted into whole life insurance. However, with Convertible Term Insurance, the insurance company is bound to renew the insured person's coverage, even when there are changes to his age and his health.

The advantage of a convertible term insurance plan is that the insured person can start out with low insurance premiums (as term life is cheaper than whole life insurance). And then, it gives him the privilege to convert to a whole life plan without having to go through the screening process usually done before a new policy is issued.

Coverage

Coverage is another term for insurance. The coverage of a policy outlines the kind of risk, as well as the amount, that the insurance company accepts when it issues an insurance policy. The coverage also states the period of time in which that risk is assumed by the insurance company.

For life insurance, the coverage would be the death of the insured person. For property insurance, the coverage will be the amount by which the insurance company is responsible for when the property is lost or damaged. For example, if John insured his home through a homeowners' insurance policy for $300,000, that is the coverage for that policy. The coverage will also specify what risks are covered (fire, flood, earthquakes, etc.). There are some risks that are excluded from the coverage, depending on the kind of policy you have and the insurance company that issued it.

Crash Parts

Crash Parts are also known as Generic Auto Parts. These are the parts that are most likely to be damaged during a car collision or crash. These are mainly made of sheet metal. Crash parts are what's usually replaced and paid for by an insurance company during the repair of the insured vehicle. These parts include fenders, hoods, bumper covers and grilles.

To cut down on costs (and also on auto insurance premiums), insurance companies encourage the use of generic auto parts or competitive replacement parts. These are parts that are manufactured by companies other than the one who actually manufactured the car.

Credit

Credit is a borrower's promise or guarantee that he will pay for (in the future) the money that he borrowed today. Credit also refers to the option of delaying payments to debt at some future time.

Credit is an important factor and people must seek to preserve and improve his credit standing.

To improve credit, you must pay work to clear unfavorable listings in your credit report. You may request for a credit report from the credit reporting agencies. When you pay off the unfavorable listings in your credit report, it will not be stricken off the report, but will be marked as paid. Another way to improve credit is to pay bills on time. Most companies will report late accounts and this will affect your credit standing.

Credit Derivatives

A Credit Derivative is a special kind of derivative agreement that enables a company to manage its credit risk. To do that, the company can transfer credit risk to other parties by selling all or a portion of the credit risks.

Credit Derivatives can be used to give legal entities with methods on how to decrease credit exposure brought about by loan default, bankruptcy or foreclosure.

For example, Bank 1 things that it has a high level of high-risk installment loans that it has given to a number of customers. Bank 1 can then go into a credit derivatives agreement with Bank 2. With this, all or a portion of the credit risk is accepted by Bank 2. Bank 2 will bear the risk of the loans for a fee that will be given by Bank 1. The loans are still listed in the balance sheet of Bank 1 but Bank 2 will retain the credit.

Credit Enhancement

Credit Enhancement refers to techniques or methods used in order for a company to have an improved credit rating or credit worthiness. An example of this would be through giving an insurance via standby letters of credit (provided by a bank) or by a financial guarantee.

Another example of performing a credit enhancement would be to add conversion rights to a debt instrument in an effort to decrease the interest rates.

Issuers also try to raise the credit rating of a municipal bond or an asset-backed security and improve their marketability. They do this by getting an investment rating from a bond rating agency.

Credit Insurance

Credit Insurance provides protection to individuals and businesses for debt that their creditors fail to pay. This protects the insured from being wiped out, especially if the insured is dependent on only a few big accounts. The insolvency of one of the clients may very well wipe them out as well.

Credit insurance is beneficial to both the lender and the debtor. The lender is assured that he will receive payment even if the debtor dies or is declared insolvent. On the other hand, it benefits the debtor in that he knows that outstanding debts will be eventually settled.

For businesses, this help in managing accounts receivable. Credit Insurance is mainly bought by wholesalers, manufacturers and service providers. When a client cannot pay for his outstanding accounts, the insured business can make a claim to the insurance company. Usually, there are set limits as to the maximum amount of coverage a business can get with respect to credit insurance.

Credit Life Insurance

Credit life insurance is life insurance bought by a borrower so that in case he dies before the loan is fully paid, the creditor still gets to have the full payment. Credit Life Insurance is a common feature in auto loans and credit cards. Some credit life insurance also includes disablement, since a person who gets disabled may find it difficult to pay off outstanding loans.

Credit Life Insurance is relatively cheaper than whole life, since it is a term life insurance, where the coverage lasts for approximately the length of the loan. Also, as the debt is paid, this tends to lower credit life insurance premiums since the amount of outstanding balance decreases every month.

Credit Rating

Credit Rating, which is also called bond rating, gives an evaluation of a borrower's ability to pay off the debts he has incurred. The credit rating is obtained from Standard & Poor's Moody's Investors Service, Fitch Ratings and other rating agencies.

Credit rating is determined by a number of factors. This includes the ratio of your bad debt (auto loan, credit cards) to your good debt (home loans), as well as your credit history and the current debt to income ratio.

Credit rating is important because this will determine the level of interest that will be used on your loan. If you have a bad credit rating, chances are that interest rates will be high. If you have a good credit rating, you will generally qualify for the standard interest rate, while if you have an excellent credit rating, you may even receive lower than standard rates for your loan.

Credit Score

The Credit Score is the score created based on a person's credit history. The credit score is an important consideration for a lot of things and will affect the consumer in various ways. The credit score is looked into when one is applying for a job, for a loan or for a place to rent or buy. It is also one of the considerations when buying insurance and in getting utility service, such as the telephone service.

For businesses, insurance companies review the credit score first before it issues a commercial policy. This is because those who have poor credit scores are mainly businesses with poor financial conditions. The tendency for this kind of company would be to scrimp on safety precautions, which will then lead to accidents and more claims. The same thing is considered for those who want to apply for auto insurance and home insurance. Hence, the credit score is one of the aspects insurance underwriters use to set the premium of insurance products.

The Credit Score is often computed using five areas - current level of debt, types of credit use, payment history, new credit in determining credit risk, as well as the length of credit history.

Crime Insurance

Crime Insurance refers to the protection for property losses due to theft, burglary and robbery or the commitment of some crime. Theft here will include not just the theft of physical property but of intellectual property as well. The crime would include the theft of computers and equipment, but also would include the act of selling the client lists and client information to a competitor, the theft of software files and company trade secrets. Crime insurance can also cover crimes such as forgery of documents, hacking and computer fraud.

Each of the covered perils or hazards is outlined in the policy contract. Only those crimes that are stated there will be eligible for claims payments. To further secure the business, the owner can also use fidelity bonds on his employees.

Critical Illness Insurance

Critical Illness Insurance is a type of individual health insurance that provides the insured person with a lump-sum benefit in case the person is diagnosed with an illness that is specified in the contract. Critical Illness pays a lump sum directly to the insured person if he has a critical illness such as heart attack, stroke, kidney failure, cancer that has become life threatening and so on.

There are also some policies that pay a certain portion of the face amount (say 30%) for diagnosis of a disease that is less critical or less serious. Even if the illness does not result in the insured being disabled, he still stands to get the lump sum.  

The Critical Illness Insurance is commonly a rider to another insurance product, such as a disability income policy or a life insurance policy. The claim for this insurance is only payable when the insured survives 30 days after being diagnosed. There is also a Waiting Period before claims can become payable.

Crop-Hail Insurance

Crop-Hail Insurance protects the insured against losses to growing crops caused by hail, lightning and fire. This is a protection provided to farmers since farming is a very risky matter. There are a lot of things that can happen to destroy the crops. Crop-Hail insurance is there so that farmers can focus on the task of farming, without having to worry about all the probable scenarios that would lead to his loss of his crop.

Some risks that may be protected under the crop-hail insurance are adverse weather conditions (a tornado, a drought), damage from wildlife and pest infestations. There can also be protection against a fast decline of the prices of the produced crops.

The crop-hail insurance policy specifies the kind of crop being planted, as well as the coverage of the risks. When the farmer buys the policy, the insurance company appraises the crop and gives a fair price for it. This will be the basis of the payout when the farmer makes a claim.

C-Share Variable Annuities

C-Share Variable Annuities are variable annuities that do no charge up front sales fees or surrender fees when the annuity owner decides to surrender the annuity. This is contrasted with A-Share Variable Annuities which charge an up-front sales fee and B-Share Variable Annuities, which charge a surrender fee when the annuity owner wants to discontinue his payments. With C-Share Variable Annuities, annuity owners can decide to liquidate the annuity at any time. However, there may be tax penalties levied on the withdrawals.

When evaluating annuities, it is good to evaluate the annuities by the yield it can produce. Although C-Share Variable Annuities do not charge these fees, they usually have a higher internal expense rate than standard variable annuity contracts.

Current Assumption Whole Life Insurance

Current Assumption Whole Life Insurance is a type of ordinary life insurance where the premiums may change depending on insurance experience, investment income and expenses. That means that current mortality experience and the current earnings of the insurance company in investments will also impact the policy. If the mortality experience and investment earnings are good, this will be credited to the policy through lowered premiums, through a dividend structure or through the policy's cash value account.

The death benefit, regardless of the changes in other factors, will remain the same. The cash value also has a guaranteed minimum amount, but with good performance, this can be increased. Premiums can also either be increased or decreased.

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