GLOSSARY

PACKAGE POLICY A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.

PERIL The cause of a possible loss; for example, fire, theft, or windstorm.

POLICY A written contract for insurance between an insurance company and policyholder stating details of coverage.

POLICYHOLDERS' SURPLUS The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.

PREMISES The particular location of the property or a portion of it as designated in an insurance policy.

PREMIUM The amount of money an insurance company charges for insurance coverage. (See Direct premiums; Earned premium)

PREMIUMS IN FORCE The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.

PREMIUMS WRITTEN The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.

PREMIUM TAX A state tax on premiums paid by its residents and businesses and collected by insurers.

PRIMARY MARKET Market for new issue securities where the proceeds go directly to the issuer.

PRIME RATE Interest rate that banks charge to their most creditworthy customers. Banks set this rate according to their cost of funds and market forces.

PRIOR APPROVAL STATES States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.

PROOF OF LOSS Documents showing the insurance company that a loss occurred.

PROPERTY/CASUALTY INSURANCE Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.

PROPERTY/CASUALTY INSURANCE CYCLE Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.

Protection Class The Public Protection Classification Service was created to gauge the capacity of the local fire department to respond if flames engulf an insured property. A rating of 1-10 is assigned based on information collected and analyzed using the Fire Suppression Rating Schedule. Class 1 represents the best public protection, and Class 10 indicates no recognized protection.