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Insurance Definitions and Insurance Terms
Insurance Terms By Alphabet
Insurance Glossary and Insurance Terms Definitions are below.

Choose the letter of the alphabet that your Insurance question or term falls under. You may browse the
definitions to obtain an understanding of the product you have. These definitions are not limited to just car
Insurance. Thank you for visiting our site.
The cost of a unit of Insurance, usually per $1,000. Rates are based on historical loss experience for similar
risks and may be regulated by state Insurance offices.

RATE REGULATION
The process by which states monitor Insurance companies’ rate changes, done either through prior approval
or open competition models.

RATING AGENCIES
Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They
are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and
Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage,
liquidity, investment performance, reinsurance programs, and management ability, integrity and experience.
A high financial rating is not the same as a high consumer satisfaction rating

RATING BUREAU
The Insurance business is based on the spread of risk. The more widely risk is spread, the more accurately
loss can be estimated. An Insurance company can more accurately estimate the probability of loss on
100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates
developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But
small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make
them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance
Services Office (ISO) which provides Information to help develop rates such as estimates of future losses
and loss adjustment expenses like legal defense costs.

REAL ESTATE INVESTMENTS
Investments generally owned by life insurers that include commercial mortgage loans and real property

RECEIVABLES
Amounts owed to a business for goods or services provided.

REDLINING
Literally means to draw a red line on a map around areas to receive special treatment. Refusal to issue
Insurance based solely on where applicants live is illegal In all states. Denial of Insurance must be risk-based.

REINSURANCE
Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken
by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and
therefore its capacity to sell more Coverage. The business is global and some of the largest reinsurers are
based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay
policyholder claims. Instead, they reimburse insurers for claims paid.

RENTERS Insurance
A form of Insurance that covers a policyholder’s belongings against perils such as fire, theft, windstorm, hail,
explosion, vandalism, riots, and others. It also provides personal liability Coverage for damage the
policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-
of-use Coverage, if a policyholder must move while his or her dwelling is repaired. It also can include
Coverage for property improvements. Possessions can be covered for their replacement cost or the actual
cash value that includes depreciation.

REPLACEMENT COST
Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property
without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page
of the policy.

REPURCHASE AGREEMENT /'REPO'
Agreement between a buyer and seller where the seller agrees to repurchase the securities At an agreed
upon time and price. Repurchase agreements involving U.S. Government securities are utilized by the
Federal Reserve to control the money supply.

RESERVES
A company’s best estimate of what it will pay for claims.

RESIDUAL MARKET
Facilities, such as assigned risk plans and FAIR Plans, that exist to provide Coverage for those who cannot
get it In the regular market. Insurers doing business In a given state generally must participate In these
pools. For this reason the residual market is also known as the shared market.

RETENTION
The amount of risk retained by an Insurance company that is not reinsured.

RETROCESSION
The reinsurance bought by reinsurers to protect their financial stability.

RETROSPECTIVE RATING
A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and
minimum limit based on actual loss experience. It is available to large commercial Insurance buyers.

RETURN ON EQUITY
Net income divided by total equity. Measures profitability by showing how efficiently invested capital is being
used.

RIDER
An attachment to an Insurance policy that alters the policy’s Coverage or terms.

RISK
The chance of loss or the person or entity that is insured.

RISK MANAGEMENT
Management of the varied risks to which a business firm or association might be subject. It includes
analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize
loss. These options typically include reducing and eliminating the risk with safety measures, buying
Insurance, and self-insurance.

RISK RETENTION GROUPS
Insurance companies that band together as self-insurers and form an organization that is chartered and
licensed as an insurer In At least one state to handle liability Insurance.

RISK-BASED CAPITAL
The need for Insurance companies to be capitalized according to the inherent riskiness of the type of
Insurance they sell. Higher-risk types of Insurance, liability as opposed to property business, generally
necessitate higher levels of capital.




NOTICE: These glossary definitions provide a brief description of the terms and phrases used within the
Insurance industry. These definitions are not applicable In all states or for all Insurance and financial
products. This is not an Insurance contract. Other terms, conditions and exclusions apply. Please read your
official policy for full details about coverages. These definitions do not alter or modify the terms of any
Insurance contract. If there is any conflict between these definitions and the provisions of the applicable
Insurance policy, the terms of the policy control. Additionally, this informational resource is not intended to
fully set out your rights and obligations or the rights and obligations of the Insurance company, agent or
agency. If you have questions about your Insurance, you should contact your Insurance agent, the
Insurance company, or the language of the Insurance policy.
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