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     Glossary of insurance terms…


Professional Insurance Agents: An association of independent agents involved in educational programs, consumer efforts, and government and industry affairs pertaining to the insurance industry:

Package Policy:
Any insurance policy including two or more lines or types of coverages in the same contract: Personal and commercial package policies are very common today: In fact, most policies sold are package policies:

Insurance on which the premium has been paid:

Paid-In Capital:
The amount paid for the stock sold by a corporation:

Paid-In Surplus:
Surplus paid in by stockholders, as contrasted with surplus earned through the operations of a business:

Paid Losses:
The amount actually paid in losses during a specified period of time, not including estimates of amounts that will be paid in the future for losses that occurred then:

Abbreviation for participating: See Participating:

(1) A person having professional training in some area of medical care but who is not a doctor: (2) An adjective used to denote training or treatment by paramedical personnel:

Parent Company:
The senior company in a group or fleet of insurers: See also Fleet of Companies:

Partial Disability:
See Permanent Partial Disability and Temporary Partial Disability: (G,WC,H)

Partial Loss:
A loss covered by an insurance policy which does not completely destroy or render worthless the insured property:

Participating (Par):
(1) Insurance that pays policy dividends: In other words, it entitles a policy owner to participate in allocations of the insurer's surplus: In Life Insurance there are several options available for the use of such dividends: (2) Insurance that contributes proportionately with other insurance on the same risk:

Partnership Entity:
The partnership considered as an entity and not in terms of its individual part-owners:

Party Wall:
A common wall between two buildings:

Paul Versus Virginia:
The 1869 United States Supreme Court decision holding that insurance is not commerce and, hence, not subject to regulation by the federal government: This was the ruling decision with respect to insurance regulation until the SEUA case in 1944 which reversed that decision but which was later modified by Public Law 15: See also Southeastern Underwriters Association and Public Law 15:

The person receiving money:

The cause of a possible loss: Contrast with Hazard and Risk:

See Term:

The tendency or likelihood of insurance business not lapsing or being replaced by another insurer's product; an important underwriting factor:

Personal Assets:
Wealth and things of value accumulated and owned by an individual: These would include real estate, cash, investments and other items of value:

Personal Lines:
This term is used to refer to insurance for individuals and families, such as private passenger automobile insurance and homeowner policies: Contrast with Business Insurance and Commercial Lines:

Personal Property of Others:
Property, other than real property, which is not owned by an insured: Liability forms have traditionally excluded coverage for property of others in an insured's care, custody or control: Modern homeowner forms and commercial property forms provide some coverage for property of others:

Physical Hazard:
Any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it:

Petty theft, particularly theft of articles in less than package lots: This term is associated with the insuring of cargo under an Inland Marine Insurance form:

Plain Language Laws:
Mandatory state law that requires policies to be written in everyday language so that the are easily understood: Technical terms with their technical meanings are used only where required by law or substitution would be misleading: (G,LE)

Poisson's Law:
See Theory of Probability: ***

The written statement of a contract effecting insurance, or certificates thereof, by whatever name called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof:

Policy Anniversary:
The anniversary of the date of issue of a policy as shown in the policy declarations:

Policy Conditions:
See Conditions:

Policy Date:
See Effective Date:

Policy Dividend:
The return of a portion of the premium paid on a participating policy: It represents the difference between the gross premium charged and the actual cost assessed against the policy by actuarial formula:

Policy Owner:
(1) The person who has ownership rights in an insurance policy and who may or may not be either the policyholder or the insured: (2) Often used loosely to refer to the policyholder and/or the insured: See also Insured:

Policy Period (or Term):
The period during which the policy contract affords protection, e:g:, six months or one or three years:

Policy Term:
See Policy Period:

Policy Year:
The period between policy anniversary dates:

Policy Year Experience:
The measure of premiums and losses for each 12-month period a policy is in force: Losses occurring during this 12-month period are assigned to the period regardless of when they are actually paid:

(1) The person in actual possession of an insurance policy: (2) Often used loosely to refer to the policy owner and/or insured: See also Insured:

Policyholder's Surplus:
The amount over and above liabilities available for an insurer to meet future obligations to its policyholders: In the case of a mutual insurer, it is the whole equity section of the balance sheet: In the case of a stock insurer, the equity section is divided into two parts, stockholder's surplus and policyholder's surplus:

Policywriting Agent:
An agent who has the authority to prepare and effect an insurer's policy:

Pool (Association or Syndicate):
An organization of insurers or reinsurers through which particular types of risks are written with the premiums, losses, and expenses shared in agreed amounts among the insurers belonging to the pool: A pool is often the entity to write large values, such as those on commercial aircraft:

All of the insurer's in-force policies and outstanding losses, respecting described segments of its business: Also, the total securities owned by an insurer:

Power of Agency:
See Agent's Authority:

Power of Attorney:
(1) The authority given to one person or corporation to act for and obligate another to the extent set forth in the agreement creating the power: (2) The authority given to the chief administrator of a reciprocal insurance exchange, who is called an attorney in fact, by each subscriber: See also Attorney in Fact and Reciprocal Insurance Exchange:

Precertification Authorization:
A cost containment technique which requires physicians to submit a treatment plan and an estimated bill prior to providing treatment: This allows the insurer to evaluate the appropriateness of the procedures, and lets the insured and physican know in advance which procedures are covered and at what rate benefits will be paid:

Preemptive Right:
A current stockholder's right to maintain his or her proportionate ownership in a corporation through the exercising of this right to purchase new issues of stock before the public:

Preferred Risk:
Any risk considered to be better than the standard risk on which the premium rate was calculated:

Prelicensing Education Requirement:
Statutory requirement of many states that an applicant for an insurance license must complete a specified education program before being eligible for the license:

Preliminary Term:
The period of a short-term insurance issued to cover a risk to a date which the policy owner wishes to establish as the anniversary date for future premiums:

The particular location of property or a portion thereof as designated in a policy:

The price of insurance protection for a specified risk for a specified period of time:

Premium Advance:
See Deposit Premium

Premium Deposit:
See Deposit Premium:

Premium Discount:
(1) A discount allowed on premiums paid in advance of one year, which is based on projected interest to be earned: (2) A discount allowed on certain Workers Compensation and Comprehensive Liability policies to allow for the fact that larger premium policies do not require the same percentage of the premium for basic insurer expenses such as policywriting: The discount percentage increases with the size of the premium: This is not available in all states:

Premium, Earned:
See Earned Premium:

Premium Notice:
A form notice from an insurer or agency to a policy owner that a premium will be due on a given date:

Premium, Pure:
See Pure Premium:

Premium Rate:
The price per unit of insurance: An example would be a Property Insurance rate of 10 cents per $100 of the value of the property to be insured:

Premium Receipt:
The receipt given a policy owner for the payment of a premium:

Premium Return:
See Return Premium: :

Premiums Written:
See Written Premiums:

Prepayment of Premiums:
Payment by an insured of future premiums through paying the present (discount) value of future premiums or having interest paid on his deposit by the insurer:

Present Value:
The amount of money that future amounts receivable are currently worth: For example, a Life Insurance policy may provide for payments to be made monthly for 10 years: The present value of that money would be less than the total amount of the monthly payments for 10 years because of the amount of interest that a present lump sum could earn during the term that the payments otherwise would have been made:

Presumption of Agency:
A legally binding agency relationship when, in fact, no formal agency agreement is in effect: If an insurer acts to give the appearance of agency, perhaps by furnishing letterhead and applications before a person has been licensed and appointed, an agency relationship exists under the law and the insurer may be legally bound by the acts of a person acting as agent:

Pretext Interview:
An interview in which the party gathering information refuses to reveal their identity, pretends to be someone else, misrepresents the true purpose of the interview, or pretends to represent someone who is not in fact represented: In most cases, federal and state laws prohibit pretext interviews in connection with insurance-related consumer reporting: They are permitted only in connection with investigations into suspected material misrepresentation, fraud, or criminal activity:

Primary Coverage:
Insurance coverage which covers from the first dollar, perhaps after a deductible, as distinguished from excess coverage which pays only after some primary coverage has been exhausted: Contrast with Excess Insurance:

Prior Approval Rating Forms:
A term used to indicate that an insurer must have rate changes formally approved by the state insurance department before it can use them:

Pro Rata:
(1) Distribution of the amount of insurance under one policy among several objects or places covered in proportion to their value or the amounts shown: (2) Distribution of liability among several insurers having policies on a risk, usually in the proportion that the amount of coverage in each policy bears to the total amount of coverage in all policies:

Pro Rata Cancellation:
The termination of an insurance contract or bond with the premium charge being adjusted in proportion to the exact time the protection has been in force: Contrast with Short Rate Cancellation:

Pro Rata Rate:
A rate charged for a period of coverage shorter than the normal period: An example, if an insured had coverage for only one quarter of a year, his premium would be only one quarter of the annual premuim:

The likelihood or relative frequency of an event expressed in a number between zero and one: The throw of a die is an example: The probability of throwing five is found by dividing the number of faces that have a five (1) by the total number of faces (6): That is a probability of one-sixth or one divided by six, which is :17: See also Degree of Risk, Law of Large Numbers, and Odds:

A term applied to an agent, solicitor or other person who sells insurance:

Professional Corporation:
An artificial person or entity, governed by charter, engaged in a business which provides a professional service to the public such as medicine or law:

Professional Insurance Agents Association:
A trade association of mutual insurance agents:

Professional Partnership:
An association of two or more individuals who operate and manage a busines which provides a professional service to the public such as medicine or law:

Profit Commission:
See Contingent Commission:

Prohibited List:
A list of types of business or types of risks that an insurance company will not insure: Also called the "undesirable list," the "do not solicit list," and other designations:

(1) To develop, publish and put into effect insurance rates or forms: (2) To make public, by publishing or announcing, the fact that a statute or rule of court is a legal order or direction enforceable by law, and violation of such is punishable as provided by law: (G,LE)

Proof of Loss:
A formal statement made by a policy owner to an insurer regarding a loss: It is intended to give information to the insurer to enable it to detemine the extent of its liability:

The term commonly used to refer to a potential buyer of insurance:

The act of looking for prospects, i:e:, potential insurance buyers:

Prospective Rating:
A method used in arriving at the rate and premium for a specified future period, based in whole or in part on the loss experience of a prior specified period: See Experience Rating:

Prospective Rating Plan:
A plan which uses a formula for determining premiums for a specified period on the basis, in whole or in part, of the loss experience of the previous period:

(1) A term used interchangeably with "coverage" to denote insurance provided under the terms of a policy: (2) The fire-fighting facilities in the area in which a risk is located:

Provisional Rate:
Tentative rates, premiums or commissions that are subject to subsequent adjustment: See Commission and Premium:

Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract:

Public Adjuster:
An insurance adjuster who represents an insured on a fee basis in claims settlement: Contrast with Independent Adjuster:


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