The Institutes Glossary


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Description of an option in which the underlying stock’s price is equal to the exercise or strike price when the option expires.
Favorable income tax treatment under which all tax-free cost basis is deemed distributed before any taxable gain is distributed.
The four factors involved in marketing any product or service: product, promotion, place (or position), and price.
Description of option in which the underlying stock’s price is greater than the exercise or strike price when the option expires.
Description of an option in which the underlying stock’s price is less than the exercise or strike price when the option expires.
A pension funding basis in which fund contributions are collected from current employees and are the source of payments to the current retirees.
A situation in which all liability claim holders of a financial institution seek to withdraw their funds simultaneously because they fear that the financial institution will be unable to meet their demands for cash in the near future.
Character, capacity, and capital.
Defined by the Commercial General Liability (CGL) policy as the work or operations performed by or on behalf of the named insured; material and equipment used in connection with the work; and warranties and representations regarding the work.

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A rate that is used by an insurer that is not statistically credible because adequate data do not exist for that particular coverage or class. Such rates are based on the experience and best judgment for each individual loss exposure.
The rate classifications provided by the ISO Commercial Lines Manual that describe operations with unique characteristics or for which inadequate statistical experience exists.

A type of aircraft hull insurance that provides “all-risks” coverage whether or not the aircraft is in flight at the time of loss.
A type of aircraft hull insurance that provides the same coverage as “all risks”—not in motion plus coverage while the aircraft is taxiing.
A type of aircraft hull insurance that provides “all-risks” coverage only while the aircraft is on the ground and not moving under its own power or from any resulting momentum.
A rule used to determine whether a defendant’s act was the proximate cause of a plaintiff’s harm based on the determination that the plaintiff’s harm could not have occurred but for the defendant’s act.
The most the insurer will pay for either damage by a cause other than fire to any one premises rented to the named insured or damage by fire to any one premises rented to the named insured or temporarily occupied by the named insured with the owner's permission.
Unfavorable income tax treatment under which all taxable gain is deemed distributed before any tax-free cost basis is deemed distributed.
In surety bond underwriting, the principal’s character, capacity, and capital.
Defined by the Commercial General Liability (CGL) policy as any goods or products, other than real property, that are manufactured, sold, handled, distributed, or disposed of by the named insured or others trading under the named insured’s name.

1

The surety practice that requires a contractor to have working capital equal to at least 10 percent of backlog. Alternatively referred to as "ten times net quick.”
A surety practice that requires a contractor to explain why the difference between the first and second bids is 10 percent or greater.
An annual sales fee, levied by some mutual funds, taken against fund assets to reimburse the fund for distribution costs.

4

See Section 401(k) plan.
A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff’s negligence is less than the other party’s negligence.

5

A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff’s negligence is not greater than 50 percent of the total negligence leading to harm.
A state-sponsored, professionally administered savings plan for postsecondary education expenses that accumulates funds that are federal tax deferred and may be exempt from certain state taxes.

A

A condition that prohibits the insured from abandoning damaged property to the insurer.
A policy provision that specifies the insurer's post-loss position on the rejection of damaged property abandoned by the insured.
The movement of an extremity away from the body.
The trade advantage that a country has when it specializes in goods or services it produces more efficiently and trades them for the goods and services it produces less efficiently.
Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, or inappropriate.
Liability imposed by a court or statute in the absence of fault or negligence.
A form of government led by a single ruler who selects advisers for assistance.
To apply the deductible to the actual loss before applying any coverage limits.
Death benefit paid to a policyowner during a terminally ill insured’s lifetime.
Depreciation that occurs more rapidly when an item is first purchased and then more slowly in subsequent years.
A device that measures acceleration, motion, and tilt.
The assent to an offer that occurs when the party to whom an offer has been made either agrees to the proposal or does what has been proposed.
A low-trust measure intended to reduce employee theft losses by limiting access to target property to a limited number of key employees.
A set of permissions linking a user with a specific information system object and specifying the level of access to that object, such as read, write, execute, or delete.
A security setting that controls an individual computer user's ability to review, enter, and change information in a claims information system.
A reinsurance treaty clause that gives the reinsurer the contractual right to inspect all of the primary insurer's records that pertain to the coverage provided by the treaty.
An increase or addition to property.
As defined in the BAC, includes continuous or repeated exposure to the same conditions resulting in bodily injury or property damage.
In workers compensation, the state in which the accident occurred.
A twelve-month period in which accidents have occurred, regardless of when the policy was issued or the claim was reported.
A random event, neither intended nor expected by the insured.
Provision in a life insurance policy that doubles (or triples) the face amount of insurance payable if the insured dies as a result of an accident.
Increases the face amount of the policy if the insured dies accidentally.
A method of organizing ratemaking statistics that uses incurred losses for an accident year, which consist of all losses related to claims arising from accidents that occur during the year, and that estimates earned premiums by formulas from accounting records.
An underwriting practice that accepts an otherwise undesirable risk at the request of the producer. Often the producer writes other types of business profitably for that client.
An agreement (accord) to substitute performance other than that required in a contract and the carrying out of that agreement (satisfaction).
Making sales to new customers.
A billing plan under which the producer pays the insurer the premiums due according to a billing statement prepared by the producer.
Making additional sales to existing accounts.
A format used to display balance sheet information in which assets are listed on the left-hand side of the page, and liabilities and stockholders’ equity are listed on the right-hand side.
The process to review the account by prioritizing and organizing in order to develop any sales action.
Selling new types of insurance products to existing clients.
A method of underwriting in which all of the business from a particular applicant is evaluated as a whole.
Sales activities such as increasing an account’s limits or adding coverage to existing policies to better cover the client’s needs.
A report attached to the financial statements that explains the accountant’s level of service provided and, in some cases, includes an opinion statement giving the accountant’s opinion regarding the financial statements as a whole.
The liability arising out of harm to clients and others caused by breach of an accountant's legal duty.
The classification, analysis, and determination of the appropriate method of reporting the effects of the bookkeeping records in an organization's financial statements.
A low-trust measure intended to limit employee theft losses by keeping track of cash flows and detecting any improprieties.
The date (month and year, or quarter and year) the transaction was entered on the insurer’s financial books; required on both premium and loss records.
The equation that relates assets to liabilities and owners’ equity.
The income for an accounting period determined by the application of a particular set of accounting rules to an organization’s financial events.
An accounting rule that requires financial statements to be prepared over relatively short time periods.
A measure of profitability that is found by dividing the annual net income by the average annual investment in a project.
A current liability representing monies owed by a business to its suppliers for goods and services rendered.
A current asset representing monies owed to a business by customers for goods or services rendered.
Form that covers losses (including uncollectible accounts) due to destruction of the insured’s records of accounts receivable.
Insurance that covers the sums the insured is unable to collect when records of accounts receivable are destroyed by a covered cause of loss.
An efficiency ratio that indicates how quickly a business collects the amounts owed by its customers.
A reinsurer that is otherwise unauthorized to do business in the same jurisdiction as the primary insurer but that is granted approval to assume reinsurance by meeting the state insurance department's requirements.
An accounting basis under which revenues and expenses are recorded as they are incurred rather than when cash is received or paid.
An accounting method that recognizes income in the accounting period in which it is earned and recognizes an expense in the accounting period in which it is incurred.
A depreciation valuation method that reflects the total amount that has been expensed up to the date of the financial statement.
A clause in open cargo policies that doubles the policy limit when, for reasons beyond the control of the assured, shipments accumulate at some point in transit.
The part of a savings program during which funds are accumulated.
The period during which a deferred annuity’s cash value is accumulated for eventual liquidation in periodic payments during the annuitization period.
Share in a variable subaccount's investment portfolio purchased by allocating variable annuity premiums and/or cash value to the variable subaccount.
In model performance evaluation, a model’s correct predictions divided by its total predictions.
The cup-shaped socket of the hipbone.
A liquidity ratio that provides a measure of a company’s ability to meet its current obligations if it cannot sell its inventory.
A type of application, developed by ACORD, that an insurer can use to obtain additional information for certain coverages or classes of business.
The purchase of one company’s stock by another company.
Costs incurred by an insurer consisting primarily of commission compensation paid to agents and brokers.
A natural and unavoidable catastrophe that interrupts the expected course of events.
The process of listening with mental and physical openness to more clearly determine a message's meaning.
A sensor that requires an external power source to execute its intended operation.
The actions required by organizational units or departments for completing a tactic.
A process that helps managers determine which activities must be performed, how activities should be grouped, and which priority each activity should have in the organizational structure in order to achieve the organization’s goals and objectives.
A record of all the activities and analyses that occur while handling a claim.
An injury management technique for allowing patients to continue enough physical activity to avoid complete disability while maintaining a tolerable comfort level.
A financial ratio that compares the level of sales with the account balance for various assets and measures how effectively management employs its resources to produce sales.
A standard that focuses on the activity undertaken to achieve a particular result regardless of the success of that activity.
Authority (express or implied) conferred by the principal on an agent under an agency contract.
A method in valuing property that is calculated as the cost to replace or repair property minus depreciation, the fair market value, or a valuation determined by the broad evidence rule.
Cost to replace property with new property of like kind and quality less depreciation.

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