An investment strategy that involves investing a fixed dollar amount at regular intervals in one or more financial instruments.

From the point of view of a particular state in the United States, a company that is incorporated under the laws of that state. Contrast with alien corporation.

See state of domicile.

See state of domicile.

An accidental death benefit that is equal to the face amount of a life insurance policy's basic death benefit and is paid when the insured's death is the result of an accident as defined in the policy. See also accidental death benefit (ADB).

See deferred acquisition costs (DAC).

See deferred profit sharing plan.

See specified disease coverage.

See Diagnostic Related Groups.

In reinsurance transactions, a written notice to a ceding company indicating that, if no response is received within a certain period of time—such as two weeks—the reinsurer will cancel the reservation of facilities.

See deposit administration contract.

In reinsurance transactions, written notification to a reinsurer stating that a ceding company no longer needs the reinsurance and asking the reinsurer to cancel the reservation.

See dynamic solvency testing.

An accounting concept that states that every financial transaction has two aspects—debits and credits—that always equal each other.

Insurance claims that have been approved by an insurer but have not yet been paid to the policy beneficiary.

An investigation process, required for merger agreements and reinsurance arrangements, which includes evaluating whether the investigated company (1) has adequate reserves and (2) uses sound pricing techniques.

See external audit.

Income that was expected before a financial reporting date but that has not yet been received as of the reporting date.

See dynamic solvency testing (DST).

See flexible budget.

A type of scenario analysis required annually for insurers in Canada that employs simulation modeling to project, as of a given valuation date, the insurer's existing and future business, and to compare the amounts of the insurer's assets, liabilities, and owners' equity at various times after the valuation date. See also scenario analysis.

See deferred acquisition costs.

A form of scenario analysis, broader in scope than cash-flow testing, in which insurers use simulation modeling and multiple-scenario testing to project future values for an insurer's assets, liabilities, and owners' equity. See also scenario analysis.

See open group valuation.

Under a long-term care (LTC) insurance policy, the amount an insurer will pay for each day of an insured's long-term care at a care facility or in the insured's home.

A periodic review of electronic data to determine if the data has been duplicated, deleted, or incorrectly linked in an organization's various databases.

In reinsurance arrangements, the date upon which the reservation of reinsurance facilities will be cancelled if the reinsurer does not receive a cession or placement information from the ceding company.

See dynamic capital adequacy testing.

A person or entity engaged in the business of buying or selling securities for its own account. Contrast with broker.

(1) For a life insurance contract, the amount of money paid by an insurer to a beneficiary when a person insured under the life insurance policy dies. (2) For an annuity contract, the amount of money paid to a beneficiary if the contract owner dies before the annuity payments begin.

A document that attests to the death of a person and that bears the signature—and sometimes the seal—of an official authorized to issue such a certificate.

A request for payment, upon the death of the insured, under the terms and conditions of a life insurance policy.

An unsecured corporate bond for which the borrower does not pledge any assets or income as security.

(1) In accounting, a specified change made to the monetary value of an account. A debit increases the value of asset accounts and expense accounts, whereas it decreases the value of liability accounts, owners' equity accounts, and revenue accounts. (2) In the home service insurance distribution system, a group of clients or the geographical area to which a home service agent is assigned.

See home service agent.

See industrial insurance. See also home service distribution system.

In the numerical rating system used for underwriting life insurance, a proposed insured's medical, personal, and financial characteristics that have an unfavorable effect on the individual's mortality rating and are assigned “plus” values. See also credits and numerical rating system.

An amount owed.

Assets that represent an investor's loan of funds to a debtor in return for a promised repayment of the loan plus interest.

A type of group that generally is eligible for group insurance and that consists of individuals who have borrowed money from a specific lender or lenders.

A financial ratio, calculated by dividing a company's total long-term debt by its total equity, that is helpful in determining a company's solvency.

In insurance underwriting, the group of proposed insureds whose impairments or anticipated extra mortality are so great that an insurer cannot provide insurance coverage to them at an affordable cost. Also known as uninsurable class. Contrast with preferred risk class, standard risk class, and substandard risk class.

Term life insurance that provides a death benefit that decreases in amount over the policy term. Contrast with increasing term life insurance.

A feature included in a medical expense insurance policy that requires the insured to pay a flat dollar amount for eligible medical expenses before the insurer will begin making benefit payments under the policy.

In the United States, a regulatory provision which states that, if a state insurance department has not disapproved a policy form within a specified time—such as 30, 45, or 60 days from the date of filing, then the policy form is deemed to have been approved by the department.

A failure to meet a financial obligation.

See credit risk.

Costs reported under U.S. GAAP that are related primarily and directly to acquiring new business and retaining current business associated with new insurance products. Insurers establish a deferred acquisition costs (DAC) account in order to counterbalance the accounting entries for the amortization of first-year acquisition expenses.

An annuity in which the benefit payments are scheduled to begin at some stated point in the future. Contrast with immediate annuity. See also annuity certain, annuity due, ordinary annuity, and straight life annuity.

A plan established by an employer to provide income benefits to an employee at a later date, such as after the employee's retirement, if the employee does not voluntarily terminate employment before that date.

See deferred acquisition costs (DAC).

In the United States, life insurance premiums due after the date of the Annual Statement but before the next policy anniversary date and the next Annual Statement date.

A Canadian retirement program under which plan sponsor contributions are related to the sponsor's profits and are tax deductible by the plan sponsor, subject to specified annual maximum amounts.

A pension plan that identifies the amount of the retirement benefit each plan participant will receive at retirement. The amount of the benefit is based on the employee's income, years of service, or both income and years of service. The plan sponsor is obligated to deposit enough assets into the plan to provide the promised benefits. Contrast with defined contribution pension plan.

A pension plan that describes the plan sponsor's annual contribution to the plan on behalf of each plan participant. At retirement, the amount of a participant's benefit is calculated based on the accumulated value of contributions made by, or on behalf of, the participant. Also known as money purchase plan. Contrast with defined benefit pension plan.

The process of converting a mutual insurance company's corporate form of organization to that of a stock insurance company. See also mutual insurance company, mutualization, and stock insurance company.

Supplemental medical expense insurance that provides benefits for routine dental examinations, preventive work, and dental procedures needed to treat tooth decay and diseases of the teeth and jaw.

For insurance purposes, a spouse or an unmarried child—including an adopted child, stepchild, or foster child—who is under age 19 or to age 25 if disabled or a full-time student, and who relies on an insured person for support and maintenance.

See family benefit coverage.

A funding vehicle for a pension plan in which the plan sponsor deposits assets with an insurer and the assets are placed in the insurer's general investment account. At a plan participant's retirement, the insurer withdraws funds from the general account to purchase an immediate annuity for the retiree. The insurer usually provides the plan sponsor with guarantees against investment loss, as well as a guaranteed minimum investment return. See also immediate participation guarantee (IPG) contract.

A commission schedule for annuity sales agents in which the commissions are calculated as a percentage of new premiums paid into an annuity.

A financial services company, such as a commercial bank or thrift institution, that engages in the retail banking activities of accepting deposits from individuals and making loans.

In accounting, the systematic cost allocation process used to record the decline over time in the usefulness of a company's tangible assets. In general, a decline in price or value.

A financial security, such as a stock option, that derives its investment value from another security.

In reinsurance, the systematic review of a ceding company's quality of administration, performed by the assuming company at the assuming company's offices.

A state insurance department examination of some of an insurer's business records that is conducted in the offices of the insurance department.

A letter issued by the Internal Revenue Service (IRS) in the United States in response to an insurer's request that the IRS evaluate a specific product and determine whether the product meets federal tax requirements.

The expenses related to starting a new product or line of business.

See dynamic financial analysis.

See disability income insurance.

Numbers and words that represent specific medical diagnoses and treatments and are used by health care providers to communicate medical information about medical expense claims to insurers. See also International Classification of Diseases and Related Health Problems and Physicians' Current Procedural Terminology.

A medical expense claim payment method under which an insurer pays hospital charges not according to the number and types of services delivered, but according to the diagnosis for a patient.

A method of allocating organizational costs, which assumes that, a service department benefits production departments only.

A type of open panel health maintenance organization (HMO) that contracts directly with physicians to provide medical services for HMO members. See also open panel HMO.

In accounting, a cost incurred for or physically traceable to one specific product, line of business, department, or other cost object. Contrast with indirect cost.

An insurance sales distribution system wherein the customer purchases products directly from an insurer without the assistance of an insurance agent. The customer responds to the company's advertisements or telephone solicitations that are designed to elicit an immediate and measurable action—such as an inquiry or purchase—from the customer.

In the insurance industry, an insurance product sold to consumers without the help of a marketer, usually through direct mail, advertising in print and other media, telephone solicitation, or, the Internet.

See rollover.

See rollover.

See direct writing company.

An insurer that sells coverage directly to consumers. Also known as direct writer and direct insurer.

For a variable annuity contract, contributions made by the owner that specifically indicate the percentage of the deposit to be allocated to each investment subaccount.

See insurance commissioner.

In disability insurance, the inability of an insured person to work due to an injury or sickness. Each disability policy has a definition of disability that must be satisfied in order for the insured to receive the policy's benefits. See also residual disability and total disability.

A type of disability income insurance that provides benefits designed to fund the buyout of a disabled partner or disabled owner in a business.

A type of health insurance designed to compensate an insured person for a portion of the income lost because of a disabling injury or illness. Benefit payments are made either weekly or monthly for a specified period during the continuance of an insured's disability. See also income protection insurance.

For an insurance company, a claim reserve liability that is the present value of all amounts that are predicted to become payable while an insured is disabled. See also claim reserves.

(1) In general usage, any payments of money. (2) For annuity contracts, payments insurers make from deferred annuity contracts during the accumulation period. Also known as distributions.

As defined by the National Association of Insurance Commissioners (NAIC) Life Insurance Illustrations Model Regulation, a scale of nonguaranteed elements that is based on an insurer's actual recent experience and that is certified by an illustration actuary. See also illustration actuary.

An auditor's statement indicating that an external auditor of an entity's financial statements has no opinion on the entity's financial statements.

In marketing, the practice of providing consumers with specific types of information designed to improve purchasers' knowledge of the products they are considering purchasing and to enable them to compare the costs of various products.

For individual retirement annuities, a written statement that an insurer in the United States must provide to consumers considering the purchase of an individual retirement annuity that provides nontechnical explanations of the operation of the annuity, including explanations of the statutory requirements for such an annuity, the income tax consequences of purchasing such an annuity, and the income tax consequences of specific types of transactions relating to the annuity.

A bond that has a current market value that is lower than the bond's principal or par value. Contrast with premium bond.

A fee structure used by some health maintenance organizations (HMOs) under which the HMO pays physicians a certain percentage of their normal fees, thereby achieving a “discount” on those fees.

Costs that are partially or wholly under the control of current management and are flexible components of a budget that can be changed as conditions change.

According to the National Association of Insurance Commissioners (NAIC) Group Life Insurance and Group Health Insurance Standard Provisions Model Acts, any type of group other than a single employer group, a debtor-creditor group, a labor union group, a multiple employer group, an association group, or a credit union group that is eligible for group insurance if approved by the applicable state insurance department.

A phenomenon in which customers remove money from a financial intermediary. See also run on assets.

See resisted claims.

For sales operations, the process of transferring goods or services to customers.

See distribution system.

All the costs directly associated with selling products. Insurance distribution expenses include agent compensation, group sales representatives' salaries, postal, printing, and telecommunications expenses.

In marketing, a network of organizations and individuals that performs all distribution activities. Also known as distribution channel. See also distribution.

See disbursements.

For sales operations, an individual assigned to oversee the marketing operations for a company in a defined district within an overall sales area.

A defensive principle of investment portfolio construction that requires balancing the selection of portfolio assets among a variety of types of securities or industries.

(1) For investments, a share of a company's earnings that the company pays to the owners of its stock. Dividends paid in cash are called cash dividends. Dividends paid in the form of additional shares of stock are called stock dividends. (2) For participating insurance policies, a portion of an insurer's surplus paid to the owner of an individual participating life or annuity policy. Commonly referred to as a policy dividend. (3) For group insurance policies, a premium refund paid to the policyholder of a group insurance policy. See also experience refund.

See accumulation at interest option.

See paid-up additional insurance option.

A provision included in participating life insurance and annuity contracts that describes the contract owner's right to share in the insurer's divisible surplus and the dividend payment options available to the contract owner. See also policy dividend options.

The portion of an insurance company's earnings that is available for distribution to owners of the company's participating policies after deductions are made for liabilities, capital, and special surplus. Also known as unassigned surplus. See also surplus.

In the field of insurance, a legal doctrine by which a court interprets the terms of any insurance contract in such a way as to honor the reasonable expectations of the individual who purchased the policy even though the language of the policy does not literally support these expectations.