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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.

Identity Theft Insurance

Identity Theft Insurance provides protection for losses and expenses resulting from identity theft.

This is a new kind of insurance and helps cover a cost when a person has to recover financially in the event that his identity is stolen. Identity theft means the act of using another person's identity. That is, the crime of pretending to be someone else in order to get or steal money or obtain benefits.

Identity Theft insurance will pay for costs such as the loss of income because the victim had to meet with credit agencies or lawyers, the legal costs involved including attorney's fees and defense fees, as well as the cost of notarizing affidavits regarding fraud. There may also be associated costs involved for reapplying for loans.

Immediate Annuity

An Immediate Annuity is a type of annuity that requires the payment of a lump sum, and the annuity payments can commence right afterwards (usually at the end of a year).

For example, John gets an immediate annuity and pays a premium of $150,000 on January 1 of this year. The next year, starting from January 1, he will begin receiving income payments from the annuity.

An Immediate annuity may either be variable or fixed. Immediate annuities are usually life annuities, where the annuitant gets regular and level payments throughout the rest of his life. Upon the death of the annuitant, the payments will stop.

Income-Date

The income date refers to the date when the annuity matures.

This is when the annuitant will start getting regular annuity payments as stipulated in the annuity contract.

The annuity usually has two phases - the savings phases, where the annuitant pays regular premiums to save up for the annuity and the income phase, where he will start receiving the income payments. The income date refers to the date in between, where the savings phase ends and when the income phase begins.

The income date is also called the annuity date or the maturity date.

Income Protection Insurance

The Income Protection Insurance provides protection in the event that the insured person is unable to work because of total disability, or he is earning less because than he used to earn.

This kind of insurance pays an income benefit that will provide the insured with steady income even during his disability. This pays all or a certain percentage of your monthly income and may cover against sickness, illness, accident or major trauma.

The payments will continue until the insured person is able to get back to work. There are also some policies that require the insured person to get training that will enable him to be employed and earn an income.

Usually, there is a waiting period before the income payments start. There is also a limit on the age when the insured will be paid the insurance benefit.

Incontestability Provision

The Incontestability Provision states that when the contestable period has passed, the insurance company cannot revoke the policy, even if it discovers that the policyholder concealed key information from the company when the policyholder applied for the insurance.

There is a contestable period where the insurance company has the right to cancel the policy when it discovers fraud or misrepresentation on the part of the insured person. The insurance company may also refuse payment on claims during this period.

However, when the insurance company discovers that the insured person misrepresented his age and he dies after the incontestability provision, the death benefit of the policy will be adjusted according to the insured person's true age.

Increasing Term Life Insurance

An Increasing Term Life Insurance is a type of life insurance that provides the insured with increased life coverage throughout the duration of the policy.

Although the premiums are level or do not change at the time the policy is in force, the death benefit increases at a specified amount or percentage at the interval stated in the policy. The increases will continue until the policy expires or until the period stated in the policy.

The Increasing Term Life Insurance is usually bought as a rider to meet special needs and never as a stand-alone policy. This may also be used to hedge inflation, particularly if the insured has a growing family.

Incurred But Not Reported Losses (IBNR)

Incurred But Not Reported Losses refer to the losses that happened during the coverage period but was only reported or filed to the insurer or reinsurer years after the policy is sold.

Called IBNR for short, this has a strong impact on the profitability statements of the insurance company and the reinsurer. The insurance company might consider an account or a line profitable when in reality; there are claims to be made against the policy. This lack of information will affect the way premiums are computed, as there may be actual claims, or again, there may really be no claims at all.

Incurred Losses

Incurred Losses referred to the total amount of claims paid and loss reserves that are associated with a certain time frame, such as a policy year.

Incurred losses are computed by adding up any losses during the policy year and any outstanding losses at the end of that period, subtracted by the outstanding losses at the beginning of the year.

This is an important measurement tool for insurance companies in order for them to establish the right amount of reserves, as well as right computation for the premiums and loss ratios.

These are losses that may either be paid or not.

Indemnify

To indemnify means to provide monetary compensation for loss that occurred.

Indemnity aims to restore an injured person to the condition that he previously enjoyed before the loss occurred. This may be in part or in whole.

The indemnity will help in restoring whatever was lost, which may involve the purchase, payment, replacement or repair of the insured property.

However, there is no set value for human life. Instead, one can look at the earning potential of that person to see what has been lost. In the event of the insured person's death, life insurance pays the death benefit with the purpose to help the family of an insured person to have the finances to continue living as if the insured breadwinner were still alive.

Independent Agent

An Independent Agent is one that may sell insurance products from more than one insurance company.

As an independent agent, he has the capacity to pick and choose the products that he will sell to his clients, based on their specific needs. The independent agent earns by commission and is usually self-employed.

Also known as a broker, he also owns the clients, and represents them to the insurance company, by helping them with service issues and in settling their claims. The independent agent also acts as a consultant, by helping the client understand the different policies and can also act as a one-stop shop for all the clients' needs.

Indeterminate Premium Life Insurance Policy

An Indeterminate Premium Life Insurance Policy is a kind of life policy that has adjustable premiums.

This type of whole life insurance policy will have a guaranteed maximum premium rate and an actual premium rate. The actual premium rate (which is lower than the maximum premium rate) is based on the current estimate of mortality, expense loadings and investment earnings. The actual premium rate changes depending on the changes of these factors, but the premium will never exceed the guaranteed maximum premium.

This provides the policy owner with the benefit of lower-than-expected premiums, when the market and other factors do well. However, if the market and other factors are not favorable, there still is a limit as to the level of premium he has to pay.

Indexed Life Insurance Contract

An Indexed Life Insurance Contract is a contract with the life insurance company that provides a death benefit that is equal to the account value and the selected face amount.

The account value is connected to an index's cumulative returns. The index being used is something like the CPI, the S&P 500 or any kind of tied index. This may be a bit complicated but in essence the account value will have a rate of return based on the changes in the index where the policy is tied with.

For example, an indexed life insurance policy is bought with a face amount of $200,000 and a premium of $200 monthly. It is tied to the CPI. If the CPI goes up by 5% the next year, the premiums will be $210 monthly and the benefit amount would be $210,000.

Individual Retirement Account (IRA)

An Individual Retirement Account or IRA is a savings plan for self-employed people or for people who have earnings that fall under a certain level. The IRA is tax-deductible and allows an individual to set aside a certain amount of money where taxes are not charged until he begins to withdraw from the fund. Actually, those who have employer-endorsed retirement plans can still put aside money for IRA, but these will be made on a non-deductible bases (meaning tax will be deducted from these).

An IRA can be established using a mutual fund, a bank or a brokerage.

There are several kinds of IRA. There is the traditional IRA, where money is deposited where tax is deducted. There is the Roth IRA, where contributions are made with after-tax assets. There is also what they call the Simple IRA, the Self-Directed IRA and the SEP IRA.

Inflation Guard Clause

The Inflation Guard Clause, as the name suggests, guards against inflation. This is a provision that a homeowners insurance policy can add to the policy to protect against the increases in construction costs and materials costs. There may also be added costs such as rebuilding the house with an existing foundation and other activities like debris removal.

The inflation guard clause automatically increases the face amount or the coverage. This is done at time intervals specified in the policy. Of course, the premium will usually also increase along with the increases on the face amount.

The inflation guard clause only reflects the present structure and not the improvements made.

Inland Marine Insurance

Inland Marine Insurance is a type of insurance that provides protection against loss to property in transit, in other words, moving or movable property.

The movement of the property may be not just through ocean transport (such as ships and tugboats) but can also include air and land transportation, as well as passage through tunnels and bridges. The property may be moving or in transit, or fixed at a location such as a warehouse, or may be a movable type of good that is transferred from one place to another. It may also be held by a bailee.

Inland marine insurance covers a wide spectrum of coverages - it may be used for account receivables, for art works and expensive clothes and furs, for contraction equipment, electronic equipment, jewelry, and a host of other kinds of property.

Insolvency

Insolvency refers to the company's (in this case the insurance company's) inability to pay its obligations such as claims or benefit payments and debts. This happens when the cash flow into the company and its assets are less than the expenses and liabilities.

For insurance companies, the state regulators step in once they discover that an insurance company is on the brink of insolvency. It may put the insurance company under rehabilitation or conservatorship (when the company still has assets to liquidate and salvage. The state regulators regularly require reports that they will use to compute for financial and operation ratios that serve as an early warning device that such insolvency will happen. The state regulator is tasked to help ensure the stability of insurance companies for the sake of the company's stakeholders, such as their insurance policy owners.

Institutional Investors

Institutional Investors are organizations that invest in large quantities. This usually refers to insurance companies, investment houses, pension funds and banks that buy and sell a large number of securities and other investment instruments.

An institutional investor gathers buying and negotiating power by pooling financial contributions from a lot of people. The institutional investor makes the investment in behalf of those who entrusted their investments to them - be it by premiums, pension fund collections and other kinds of investments. Because of the size of the funds they are handling, institutional investors are able to have a diverse portfolio in order for them to build a strong financial position.

The institutional investors account for over two-thirds of the trades in any one point in time.

Insurable Interest

Insurable Interest refers to the person's ability to prove that there is indeed a possibility of loss and that the person has a justifiable interest in preventing that loss from happening or in preserving the property or life being insured. There is only the possibility of loss and not gain from the insured event ever happening.

A person should be able to suffer a genuine economic loss in case the insured event happens. For instance, a family will suffer an economic loss if the father (who is the breadwinner) will die. The loss of income of the father is something that the father has an insurable interest - he would like to prevent his family from suffering from the economic impact of his untimely death.

If any person applying for insurance cannot demonstrate insurable interest, the insurance company will not issue the policy.

Insurable Risk

Insurable Risk refers to the kind of risk that meets insurance underwriting criteria.

An insurable risk is something that is characterized by being definable, involves a large number of homogenous units (meaning that there is a large enough group with roughly the same risks so as to help make the losses mathematically predictable) and that there is enough loss experience from the past regarding that same risk. Because of the capability to predict the losses from that risk, as well as the probability of that risk from happening, the insurance company is able to compute for a reasonable price for insuring the risk.

In insurance, there are some risks that are not acceptable, that the insurance company is not willing to issue a policy for. If not all of the characteristics described above are met, the risk is not considered insurable.

Insurance

Insurance refers to a system by which risk and the chance of financial loss is spread among a large number of people, properties or businesses. This risk is taken on by an insurance company, which assumes the financial aspect of the risk, in return for a premium.

This means that the insurance company agrees to pay you indemnity for the loss of a person or a property in case something happens to that person or property. The individual does not have to carry the risk by himself, instead for a smaller amount (the premium), the insurance company will do that for him.

The agreement between the person (the one paying for the premiums) and the insurance company is stated in a legal document called an insurance policy.

Insurance may be optional (such as the decision to insure your life), but some insurance is mandated by law. This includes automobile insurance, workers' compensation and so on. Lenders may also require you to be insured to protect the loan they provided from getting defaulted in case something happens to you.

Insurance Pool

An Insurance Pool refers to the collection of assets that is created by a group of insurance companies. These assets enable the insurance companies to provide insurance to a high risk account, something which only one insurance company cannot do by itself (for instance, the coverage of a nuclear power station).

There may also be pools created for the kind of insurance that the insurance companies are unwilling to sell in the voluntary market but something that the state requires them to cover. An example of this will be flood insurance offered to flood-prone areas.

The payout for these kinds of risk are not sourced from the individual company's assets, but from the assets jointly kept in the pool.

Insurance Regulatory Information System (IRIS)

The Insurance Regulatory Information System (IRIS) refers to the National Association of Insurance Commissioners' database of Insurance companies.

This database provides financial and insurance ratios that show the standing of each insurance company. These ratios show how stable an insurance company is and how able it is to pay for the claims of their policyholders. If the ratios computed do not meet the range (the standards set by the IRIS and the state insurance commission), it will serve as an early warning device for the regulator to step in to ensure that the insurance company in question does not close down.

The ratios used in life and health insurance companies include the ratios of non-admitted to assets, investments in affiliates to surplus and capital, yield on investments, expenses to premiums, as well as net gain to total income.

For property and casualty insurance companies, the ratios include that of net written premiums to adjusted policyowners' surplus, current year increase or decrease in net written premiums to net written premiums for the previous year, and liabilities to liquid assets.

Insurance Score

The Insurance Score refers to the rankings of consumers based on their credit information.

The insurance score reflects several aspects of the consumers' activities - but generally these look into how well the consumers' are able to run their financial affairs. It looks at open credit card accounts, the regularity and timeliness of loan payments and whether a consumer has already filed for bankruptcy. It also looks at any insurance claims the consumers may have made.

The insurance score is an indication of how responsible the consumer is - so it is an effective tool for writing policies and for determining the premiums of the policies. Thus, if a person has a high credit score, it means that that person is better as an insurance risk.

Insurance-To-Value

Insurance-To-Value refers to the amount of insurance written compared to the actual value of the property being insured.

When insurance-to-value is less than 100%, that means the property is underinsured. And when insurance-to-value is more than 100%, the property is overinsured.

This is an important underwriting tool, one that is needed for the correct computations of the premiums for the risks that the insurance company assumes. Having incorrect insurance-to-value information may very well undermine the stability of the insurance company, since premium rates are based on faulty information.

Insurance-to-value is also important for home and property owners, since this can help them know that their property is underinsured. Many of these homeowners may be faced with a loss that far exceeds their insurance limits and they may have to shell out more money in order to replace their property in the event of a total loss.

Integrated Benefits

Integrated Benefits refer to combined coverage - there is one package to cover a number of insurance offerings - general health insurance, non-occupational injuries or illnesses, as well as job-related injuries or illnesses. The act of combining all of the benefits makes the management of these benefits convenient and cost-effective for everyone concerned.

An integrated benefits package allows the employee to choose from a menu of services he can avail, in order for him to build the package that will best suit his needs. An integrated benefits package also offers a number of choices even for the same kind of benefit or service. Thus, the employee has more choices.

The package also makes it easier for the employer, as managing the benefits all from one source saves time and effort. The employer may have a department in the company to administer the benefits or outsource it to an outside company.

Interest-Adjusted Cost Comparison Index

The Interest-Adjusted Cost Comparison Index refers to the index that compares the time value of money to the costs of the insurance policy. Time value of money refers to the supposed investment return if the money used for was invested somewhere else instead. Comparing what a person might pay for an insurance policy and what that money would have earned elsewhere gives the person valuable information that will enable him to determine the most cost-effective policy he can choose.

Some factors that are considered when computing for interest-adjusted cost include: the frequency of the premiums, the amount of the premium payments, the dividends paid (including the frequency of payouts, as well as the amount), the cash surrender value, and the length of the policy.

Interest-Sensitive Insurance

Interest-Sensitive Insurance refers to the kind of insurance where the cash value and the policy's face amount may change, based on the investment earnings of the insurance company.

Although most of these policies offer a guaranteed death benefit, the dividend component of the policy will vary and are tied to the changes in interest rates. For instance, universal life insurance policy owners may enjoy a higher increase in cash values caused by a rise in interest rates but may suffer a slower rate of increase when the interest rates take a plunge.

The advantage of this is that the dividends may act as a hedge in case of the rise in inflation. But, if there is a decline in the inflation rate, the policy would earn lower dividend earnings and interest.

Intermediation

Intermediation refers to the act of "match-making" investors and savers with borrowers. Borrowers aim to obtain money by way of a loan so that they can finance their company's operations or projects. Meanwhile, investors and savers are looking for a good place to put their money so that it may gain a good return. Intermediation may also involve a third party or agent, such as a bank or a depository institution.

When the intermediation is successful, the third party (the bank) gets a marginal return ("commission") for successfully matching the borrower with the lender. However, if the intermediation is unsuccessful, this may mean that the borrower failed to pay off the loan, the saver or depositor can lose his investment and the bank can experience an adverse effect to its loan portfolio.

Internet Insurer

An Internet Insurer is an insurance company that sells its products exclusively through the Internet, meaning the main market for their products is through electronic commerce.

Internet Insurers claim to provide an advantage since the Internet is easily accessible and the proposed insured can browse and compare the products for the best deal. And since the proposed insured is able to transact directly with the internet insurer, he is able to do away with agents and thus, the commissions paid to agents. This means that the proposed insured faces savings in his purchase of the insurance.

However, it really depends on what the proposed insured wants and needs. If the person needs a more personalized level of service and would prefer guidance and advice in choosing his insurance policies, he may very well do better with an agent, since an agent can provide these for him.

Internet Liability Insurance

Internet Liability Insurance refers to the insurance that provides coverage for liabilities that result from the individual's and company's internet transactions. This insurance protects against Internet-related damages, including violation of privacy, copyright infringement, identity theft and defamation. Other risks include the inadvertent spread of a computer virus or misuse of information.

Anyone (individuals and companies included) who maintains a website and publishes information may face the prospect of legal exposure and liability that a published has. This is really a relatively new concept and is at present evolving and changing. This, coupled with new legislation, can result in serious consequences, like lawsuits that demand for payments and indemnity for alleged damage caused by the website.

The traditional liability insurance do not cover the risks posed by the Internet and so if you have a website, it will do you good to have internet liability insurance to protect yourself from having to pay legal costs and damages in case you lose a lawsuit connected with your website.

Investment Annuity

An Investment Annuity is an annuity contract that is designed to help people save up for a future event, such as their retirement. An annuity pays for a stream of regular income or a lump sum once the annuity matures.

Investment annuities are usually deferred annuities. This annuity contract involves regular deposit payments to the plan, but withdrawals are highly discouraged, until the annuity reaches its maturity. The annuitant can place his annuity premiums during the savings phase and this continues until the annuity reaches its payment phase. This is the point where the annuitant or his beneficiaries start receiving the income payments and the deposits stop.

Investment Income

Investment Income refers to the income that is gained from investment activity. For insurance companies, this is one source of their income. The other source of income would be premiums (minus expenses and claims).

For investment income to be generated, the investment amount must get a rate of return in such a way that the revenue is more than the original assets invested. The income may come from capital gains or from dividends obtained in relation to stock ownership.

The insurance company can involve itself in investment instruments such as bond funds, futures options and stocks.

Investment income is also the goal of the fund manager of a retirement plan or an annuity.

Irrevocable Beneficiary

An Irrevocable Beneficiary is a beneficiary to a life insurance policy or annuity. This kind of beneficiary, once assigned by the policy owner or the annuitant, cannot be removed, except if the irrevocable beneficiary agrees to it in writing.

This means that the irrevocable beneficiary has a vested interest in the annuity or policy, even when the annuitant or insured is still alive. Assigning someone as an irrevocable beneficiary instead of a revocable beneficiary may have something to do with tax savings.

The policy owner or annuitant may also assign specific percentages that the beneficiary stand to receive in relation to the death benefit or to the annuity payments. This may be the case if there is more than one beneficiary. If no such percentages are assigned, the amount is divided evenly among the number of beneficiaries.

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