Click on a term to see its definition: N

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.

Named Peril

A Named Peril refers to the risk that is identified and covered by an insurance policy.

The policy protects the insured against losses incurred from the risk. There are clauses that accompany the covered perils so that the insured knows what will not be covered by the policy. If the unlisted peril is the one that caused the damage, no claims will be paid.

This type of policy is usually provided for homeowners' insurance policy. This kind of policy is usually cheaper than comprehensive coverage policies. This may be a good idea if a proposed insured is not living in an area that is not prone to perils such as floods or earthquakes. He does not need to pay for coverage for such perils.

Also, homeowners can buy a named peril policy even when there is a comprehensive insurance policy in place if the homeowner feels that the coverage of the policy is not enough.

National Flood Insurance Program

The National Flood Insurance Program is a federal-sponsored program that allows homeowners and businesses to buy flood insurance.

Insurance companies are unwilling to issue policies for people and businesses that live in flood-prone areas, since those who buy flood insurance are usually those with a high risk of losses for flood insurance.

As a solution, the National Flood Insurance Program was formed. What it does is to create a pool of insurance companies. When an application for flood insurance comes up, it assigns an insurance company to issue the policy. All insurance companies that are licensed in that state are required to be part of the pool.

It is designed to help mitigate federal responsibility when a disaster (like a major flooding) strikes.

Net Annuity Cost

Net Annuity Cost refers to the amount that is equivalent to the present value of the income payments the annuity will provide, without the expense loading factored in. The expense loadings are the charges that the annuity issuer will levy on the annuity.

In short, this is what the annuity will cost at the present, without bringing into consideration other associated costs of the annuity such as administrative fees, investment fees or the premium for the insurance component of the annuity.

This is contrasted with the gross annuity cost, where all the expense loading are already part of the computation.

Net Payment Cost Comparison Index

The Net Payment Cost Comparison Index shows the present value of the premium payments made over a certain number of years. This helps to determine the cost of a policy and thus helps an individual to compare two or more life insurance policies. The Net Payment Cost Comparison Index looks into the time value of money.

The computations are based on the assumption that the policyowner will regularly pay the premiums on the policy and will not be getting in the cash value (or surrendering the policy).

This kind of index is useful to those who are more interested in death benefits their beneficiaries stand to get from their life insurance.

Net Premiums Written

Net Premiums Written are the total amount of premiums that the insurance company receives minus any related expenses such as agent's commissions and reinsurance premiums.

When an insurance company receives the premiums from the policyowner, this premium is called gross premiums written. These premiums are what the insurance company stands to get over the life of the contract.

When an insurance company writes an insurance policy to cover a risk and receives premiums from the policy, it oftentimes would want to spread the risk and thus ensure that it is protected from losses that exceed a specified threshold. What it does is to pass on a portion of the insurance to a reinsurer. The premiums for that portion of insurance are then paid to the reinsurer.

So, the insurance company does not get all the premiums it receives. That is why Net Premiums Written is an important performance measure for insurance companies, as it gives an indication of the level of sales for risks that they themselves cover.

No-Fault

No-Fault refers to a form of insurance protection that pays for the benefits (particularly for expenses related to the driver's injuries) no matter who caused the accident, even if the insured did not act in such a way that resulted to a loss.

No-fault insurance is put in to limit the number of liability suits (to the more serious cases), as well as to ensure quicker reimbursement of medical expenses.

This kind of insurance will vary from state to state. The insurance company, depending on the kind of policy and the rules governing the state, will also try to recoup the claims payment. It does this by going after the insurance company of the person who caused the accident.

No-Fault Medical

No-Fault Medical is oftentimes included in homeowners insurance policies and will pay for medical expenses incurred because of whatever reason, as long as the injury or damage happened inside the house.

The homeowners policy will usually list "medical payment" as part of the risks they will assume when they agree to issue an insurance policy to a homeowner. There is a prescribed limit as to how much of the medical expenses the insurance company will pay.

No-Fault Medical will only pay for medical payments and is not to be used to claim for damages for pain and suffering of the injured individual.

For example, a person slips and falls down while inside an insured home. The insurance company will pay for the medical expenses up to a certain limit.

Non-Admitted Assets

Non-Admitted Assets are the assets of the insurance company that are not allowed to be listed in the balance sheet of the insurance company. Or, they may be included in the balance sheet, but not included when performance measures like solvency ratios are being computed.

Non-admitted assets include past-due accounts receivable, fixtures and furniture, as well as the debt balances of the insurance company's agents. These are assets that are not easily liquidated in the event that the insurance company faces a large amount of claims. State law prohibits the listing of such assets as part of indicators that the insurance company is solvent enough to pay for its claims, particularly if a major tragedy happens.

Non-Admitted Insurer

A Non-Admitted Insurer refers to an insurance company that holds a license to operate in some states, but not in others.

The term non-admitted insurer is from the point of view of the state, which did not issue a license to a certain insurance company. That insurance company is considered non-admitted by that state but may be allowed to conduct some level of business in the state. This is because the non-admitted insurer is able to offer insurance coverage that none of the admitted insurers in the state is offering. These are mostly high volume and high capacity risks, unique risks and professional liability.

Non-admitted insurers do not fall under the regulation of the state, nor do these join the pool that provides insurance guarantee funds created by the state.

Noncancellable and Guaranteed Renewable Policy

Noncancellable and Guaranteed Renewable Policy refers to a health insurance policy in which the insurance company is obligated to renew the policy until the insured person reaches a prescribed age (65 years old, in most policies).

The insurance company is required to continue issuing the same health insurance cover to that individual. The only exception would be if the individual himself decides to cancel the coverage. In a noncancellable and guaranteed renewable policy, the insurance company is not also allowed to cancel the policy, change any of its provisions or increase the premiums during the renewal of the policy.

Nonforfeiture Options

Nonforfeiture options refer to the different ways that the policyowner can make use of the cash surrender value in the event that he decides to stop paying the premiums. This means that the premiums that were previously paid towards the policy are not forfeited.

When the policy lapses because premiums are not paid, the policyowner has several options regarding the policy.

Cash Surrender Option - He can opt to get the cash value of the policy and the insurance company will pay this amount to him. The cash received is taxed as ordinary income. In this case, the policy will not be reinstated.

Extended Term Option - He can also convert the coverage to term insurance and the cash value will pay for the premiums of the term insurance that offers the same face amount as the original policy. The length of the coverage will depend on the cash value of the policy.

Reduced paid-up insurance - He can opt to use the cash value to buy insurance coverage for the same period as the original policy. However, the face amount will be smaller, as this will depend on how much insurance the cash value will buy.

These are just some of the nonforfeiture options in a life insurance policy. Annuities also offer several nonforfeiture options.

No-Pay, No Play

No-Pay, No Play refers to the law that states that people who do not have insurance should not receive insurance benefits. In some states that have this law, the uninsured driver has to pay a big deductible (around $10,000) in order for them to sue for bodily harm, and another similar deductible before they can sue for property damages. Also, in most states that have this law, the drivers who do not have insurance are not also allowed to sue for pain, suffering and other related noneconomic damages.

In short, if you are driving and do not have any automobile insurance, you are waiving your rights to claim for damages.

The law only applies to people who have cars. This law does not apply to victims of hit and runs or victims of accidents caused by drunk drivers.

Notice of Loss

Notice of Loss refers to the notice that insurance companies requires when you suffer loss or property damage. This should be submitted in written form and must be submitted as soon as the insured person possible can do so.

The notice of loss includes the details of the loss and how they were incurred. The notice is important, since the insurance company may need to defend the insured, especially if he is the one at fault in the accident. This allows the insurance company to gather the evidence before these are lost, so as to be able to present a strong defense.

If notice of loss is not given right away, the insurance company may decide to deny all claims related to the event.

Nuclear Insurance

Nuclear Insurance provides protection against losses incurred in the event an accident happens during the course of the operation of nuclear reactors and other related facilities. This involves both the federal government, as well as private insurers. This covers property and liability damage.

Nuclear Insurance is usually offered by nuclear insurance pools, as individual insurance companies may be unwilling or unable to cover such a huge risk. Liability payments involving nuclear reactors may reach millions. Also, the production of nuclear energy is still an unproven and new technology, and there is a potential for catastrophic losses.

Insurance pools address these issues by trying to spread the risk across a big number of insurance companies.

Nursing Home Insurance

Nursing Home Insurance provides payments in the event that the insured person needs to stay in a nursing facility. This is a form of long-term care insurance and may only cover a stay in a nursing facility, and not long term care inside one's home.

The premiums for nursing home insurance depend on several variables - the proposed insured's age at the time of the application of the policy, his health condition, as well as the person's location.

Nursing Home Insurance is necessary for those who would like to stay in such a home when the time comes, since expenses for long-term care is not usually covered in most health insurance policies.

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