Insurance Term Glossary

Let's not let insurance jargon confuse us anymore. Get some helpful and straightforward definitions of some oft perplexing insurance terms.

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Insurance Definitions E - F


Earned premium: The portion of the premium that represents coverage already provided. For example, if an insured paid $600 for a six-month auto insurance policy one month ago, the earned premium on the policy is $100 (or 1/6 of $600).

Effective date: The date upon which the insurance policy goes into effect.

Elimination period: The time interval (waiting period) between events specified in the policy, for example, the time between a covered loss and when the first benefit is paid.

Employee Retirement Income Security Act (ERISA): Legislation applying to most private pension and welfare plans that requires certain standards (for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment) to protect participating employees.

Employment Practices Liability (EPL or EPLI): Insurance A specialized form of insurance specifically designed to protect against loss incurred in litigating and settling wrongful employment practices-liability claims.

Encumbrance: Any outside interest in property, such as a mortgagee or conditional sales contract.

Endorsement: A written provision that adds to, deletes, or modifies the provisions in the original contract.

Endowment: A life insurance contract which provides for the payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the death of the insured before the end of the stated period.

Estoppel: A legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when the representation has been relied on by the one to whom the statement was made.

Evidence of insurability: Any information concerning the proposed insured required to satisfy underwriting standards, such as a medical examination or physician's statement.

Excess insurance: Coverage which becomes available to the insured only above a stipulated amount of loss, or only after any other applicable insurance has been exhausted.

Excess interest: The difference between the rate of interest the company guarantees to pay on proceeds left under settlement options and the interest actually allowed on such funds by the company.

Exclusion: Something not covered by the policy and specifically so stated in the policy contract.

Exclusions: The section of the policy contract that specifies the losses not protected by the policy.

Expected mortality: The number of deaths which theoretically should occur among a group of insured persons during a given period according to the mortality table in use.

Expense ratio: A measure of a company's expenses that is determined by dividing the company's expenses by its written premiums.

Experience: This refers to the loss ratio status of a particular risk, or of a particular coverage, or of a particular carrier, etc. over a specified period of time.

Experience modification: A percentage increase or reduction in rates produced by application of the experience rating plan.

Expiration date: The date on which coverage ceases.

Expiry: The end of coverage under a term life insurance policy at the end of its stated term period.

Extended coverage endorsement: An endorsement added to the standard fire policy giving protection against windstorms and hail; explosions; riots; civil commotion; and damage caused by aircrafts, vehicles and smoke.

Extended reporting period: Also known as a "tail;" the period of time allowed for making claims after a claims-made liability policy expires.

Extended term insurance: One of the nonforfeiture options contained in most whole life and endowment policies; it provides that the policy owner may elect to have the cash surrender value of the policy used to extend the coverage for whatever term period the cash value will purchase.

Extra expense coverage: This protects the policyholder against the extra expense that may be involved in carrying on his/her business after the occurrence of a loss. For example, if a newspaper plant was damaged by fire, the publishing company might have to get their paper published by a rival plant until their own could be restored. Thus, they could carry on their business, but at extra expense to themselves.


Face amount: The principal amount of insurance provided at the time of issue by an insurance policy. The term derives from the fact that the amount of insurance is usually indicated on the first page or "face" of the policy.

Face sheet: A form attached to the policy identifying the insured, the subject matter of the insurance, the policy limits, etc. In casualty insurance, the face sheet is very often a copy of the declarations.

Fair Access to Insurance Requirements (FAIR): Plan A state-run property insurance plan that makes basic property insurance available to those in high risk areas who cannot obtain insurance through normal markets.

Fair credit reporting act: An act requiring that an applicant be informed in advance if an inspection/consumer report may be ordered. If insurance is declined due to information contained in that report, the applicant has the right to ask the inspection company about the information it obtained.

Federal Deposit Insurance Corporation (FDIC): A federal government agency that insures bank deposits up to a stated maximum.

Federal estate tax: An excise tax currently levied upon the transfer of property or interests in property at death. Life insurance proceeds are taxable if payable to the decedent's estate, or if payable to named beneficiaries and the insured possessed at death any incidents of ownership in the policy or policies. The value of life insurance policies owned by the decedent on the lives of others is also taxable.

Fidelity bond: A bond which will reimburse an employer for loss, up to the amount of the bond, sustained by the employer named in the bond (the insured) due to any dishonest act of a covered employee.

Fiduciary holding in trust: A person or legal entity holding assets or information as an agent-in-trust for another. For example, when an agent collects an insurance premium, he/she holds the money in a fiduciary capacity. The money does not belong to the agent as the fiduciary, so he/she should remit the premium as soon as possible.

File-and-use law: A law for regulating insurance rates under which insurance companies are required to file the rates with state insurance department before putting them into effect.

Financial responsibility law: A law requiring motorists to furnish proof of their ability to pay damages up to a stipulated amount following a loss.

Flat cancellation: Cancellation of a policy at or before it becomes effective. All premiums are refunded to the insured.

Fleet policy: A policy which provides insurance for a number of vehicles owned by one insured.

Floater policy: A policy that covers an asset or property that can be moved from one location to another.

First named insured: The person or organization whose name appears first as the named insured on a commercial insurance policy; this person or organization is usually responsible for paying premiums and has the right to receive any return premiums, to cancel the policy, and to receive the notice of cancellation or nonrenewal.

Foreign insurer: An insurance company chartered by one state but licensed to do business in another state(s).

Form: The insurance policy itself, the application, and any endorsements or riders which may be attached are each considered a "form" by the Departments of Insurance.

401(K)plan: A qualified profit-sharing or thrift plan that allows eligible employees the option of putting money into the plan or receiving the funds as cash. This tax-deferred savings plan, authorized by Section 401(k) of the Internal Revenue Code, can be established with or without employer contributions.

Fraud: A false representation of a matter of fact (whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed) which deceives and is intended to deceive another to his/her legal injury.

Free look: A period of time during which a policy owner may examine a newly issued policy and, if not satisfied, surrender it in exchange for a full refund of premium.