Texas Department of Insurance

Insurable interest - Any financial interest a person has in the property or person insured. In life insurance, a person´s or party´s interest - financial or emotional - in the continuing life of the insured.

Insurer - The insurance company.

Interpleader - This is a procedure when conflicting claims are made on a life insurance policy by two or more people. Using this procedure the insurance company pays the policy proceeds to a court, stating the company cannot determine the correct party to whom the proceeds should be paid.

Irrevocable beneficiary - A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be canceled by the policy owner unless the beneficiary consents.

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Lapse - The termination of an insurance policy because a renewal premium is not paid by the end of the grace period.

Liability - Responsibility to another for one´s negligence that results in injury or damage.

Liability insurance - An auto insurance coverage that pays for injuries to the other party and damages to the other vehicle resulting from an accident the policyholder caused. It also pays if the accident was caused by someone covered by the policyholder's policy, including a driver operating the car with their permission.

Liability coverage - Covers losses that an insured is legally liable. For homeowners insurance, for example, liability coverage protects the policyholder against financial loss if they are sued and found legally responsible for someone else’s injury or property damage.

Loss - The amount an insurance company pays on a claim.

Loss of use - A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster. 

Loss history - Refers to the number of insurance claims previously filed by a policyholder. A company will consider loss history when underwriting a new policy or considering a renewal of an existing policy. Companies view loss history as an indication of the likelihood that an insured will file a claim in the future.

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Material misrepresentation - A significant misstatement on an application form. If a company had access to the correct information at the time of application, the company might not have agreed to accept the application.

Medical payments and personal injury protection (PIP) - Both auto insurance coverages pay limited medical and funeral expenses if the policyholder, a family member, or a passenger in the car is injured or killed in a motor vehicle accident. PIP also pays lost-income benefits.

Mortality charge - The cost of the insurance protection element of a universal life policy. This cost is based on the net amount at risk under the policy, the insured´s risk classification at the time of policy purchase, and the insured´s current age.

Mortality expenses - The cost of the insurance protection based upon actuarial tables which are based upon the incidence of death, by age, among given groups of people. This cost is based on the amount at risk under the policy, the insured´s risk classification at the time of policy purchase, and the insured´s current age.

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Named driver exclusion - An endorsement to an auto insurance policy that provides that a policy does not cover accidents when a specifically named person is the driver.

Named driver policy - An auto insurance policy that covers only the drivers specifically named in the policy. Generally, all other drivers are excluded from coverage under the policy. This type of policy is usually written by surplus lines companies.

Non-owners policy - Auto insurance coverage that offers liability, uninsured motorist, and medical payments to a named insured who does not own a vehicle.

Nonparticipating policy - A life insurance policy that does not grant the policy owner the right to policy dividends.

Non-renewal - A decision by an insurance company not to renew a policy.

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Paid-up - This event occurs when a life insurance policy will not require any further premiums to keep the coverage in force.

Paid-up additions - Additional amounts of life insurance purchased using dividends; these insurance amounts require no further premium payments.

Peril - A specific risk or cause of loss covered by a property insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of loss except those specifically excluded.

Policy - The contract issued by the insurance company to the insured.

Policy loan - An advance made by a life insurance company to a policy owner. The advance is secured by the cash value of the policy.

Policy owner - The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary, or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.

Policy period - The period a policy is in force, from the beginning or effective date to the expiration date.

Preferred provider organization (PPO) - Hospital, physician, or other provider of health care which an insurer recommends to an insured. A PPO allows insurance companies to negotiate directly with hospitals and physicians for health services at a lower price than would be normally charged.

Premium - The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.

Premium load - An amount deducted from each life insurance premium payment, which reduces the amount credited to the policy.

Property damage (PD) - Physical damage to property.

Renewal - Continuation of a policy after its expiration date.

Rental reimbursement coverage - Auto insurance coverage that pays a set daily amount for a rental car if the policyholder's car is being repaired because of damage covered by the auto policy.

Renters insurance - A form of property insurance that covers a policyholder’s belongings against perils. It also provides personal liability coverage and additional living expenses. Possessions can be covered for their replacement cost or the actual cash value, which includes depreciation.

Replacement cost - Insurance coverage that pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation but limited by the policy’s maximum dollar amount.

Rescission - The termination of an insurance contract by the insurer when material misrepresentation has occurred.

Residual market - Insurers, such as assigned risk plans and the Texas FAIR Plan, that exist to provide coverage for those who cannot get it in the standard market.

Return premium - A portion of the premium returned to a policy owner as a result of cancelation, rate adjustment, or a calculation that an advance premium was in excess of the actual premium.

Rider - A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also called an "endorsement."

Rule of 78 - This is a method for calculating the amount of unused premium that takes into account the fact that more insurance coverage is required in the early months of the loan, since the payoff of the loan is greater. As the loan is paid off, less coverage is being paid for, so the refund percentage decreases.

Rule of anticipation - This is a similar method to "Rule of 78" where the amount of unused premium takes into account the fact that more insurance coverage is required in the early months of the loan, since the payoff of the loan is greater. As the loan is paid off, less coverage is being paid for, so the refund percentage decreases.

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