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 M - N


M

Malpractice: Professional misconduct or lack of ordinary skill in the performance of a professional act. Malpractice liability covers performance of a professional act. Coverage for malpractice liability is excluded by most public liability policies because it is considered a specialized form of insurance.

Market conduct examination: An examination, conducted by insurance department examiners, of the business practices and operations of an insurer and its agents. Areas of review may include company operations and management, complaint handling, marketing and sales, producer licensing and conduct, policyholder service, underwriting, and claims.

Master contract: Issued to the employer under a group insurance plan, and containing all the insuring clauses which define employee benefits. Individual employees participating in the group plan receive individual "certificates," which seldom repeat all the insuring clauses contained in the master policy.

Mature: A life policy is mature when the face amount becomes payable during the lifetime of the insured.

Maturity: The date at which a security, like a bond, is redeemed at face value by the issuer.

Medical examinations: Usually conducted by a licensed physician, the medical examination is part of the application for life insurance. Thus, it becomes part of the policy contract, and is attached thereto. The so-called "non-medical" in reality is a short-form medical report, and is filled out by the agent. Various company rules, such as amount of insurance applied for or already in force, age of applicant, sex, past physical history, date revealed by inspection report, etc., determine whether the examination shall be "medical" or "non-medical."

Medical information bureau (MIB): A clearinghouse that stores information on the health histories of persons who have applied for insurance from subscribing companies. Insurers use this to get more thorough underwriting information.

Medical payments coverage: A coverage found in auto and liability policies that pays medical expenses to covered (injured) persons without regard to liability.

Merit rating: Computing premium on a policy, such as for auto insurance, on the basis of an insured’s loss record.

Minimum premium: The smallest amount for which an insurance company will issue coverage under a given policy.

Mini tail: Refers to the provision that automatically extends the reporting period of an expiring commercial general liability (CGL) "claims-made" policy to 60 days for claims not covered by renewal or replacement policies.

Misrepresentation: Generally, a misstatement of material fact(s). Misrepresentations can be made on an application for insurance by the insured or can be made by an agent to an insured as to the insured’s coverage.

Misstatement of age provision: If the age of the insured is misstated in an application for life insurance, the benefit payable is usually adjusted to what the premiums paid would have purchased at the correct age.

Monoline policy: A policy containing a single coverage part plus the common policy conditions and common declarations.

Moral hazard: The effect of personal reputation, character, associates, personal living habits, financial responsibility, and environment upon an individual's general insurability.

Morale hazard: Circumstance that increases the probability of occurrence of a loss, or a larger than normal loss, because of an insured’s indifferent attitude after the issuance of policy. The attitude of "it's insured, so why worry?" is an example of a morale hazard.

Mortgage insurance: One of the basic uses for life insurance, so-called because many family heads leave insurance for the specific purpose of paying off any mortgage balance outstanding at their death. Many companies have designed special policies for this purpose. Insurance is generally made payable to a family beneficiary instead of to the mortgagee.

Mortgagee: The party loaning money toward the purchase of personal property, such as a bank or other lending institution.

Mortgagee clause: A clause making the proceeds payable to a named mortgagee, as interest may appear, and stating the terms of the contract between the insurer and the mortgagee.

Mortgagor: The party borrowing money to purchase property.

Motor vehicle record (MVR): The record of an automobile driver's accidents and/or traffic violations.

Mutual funds: Mutually owned funds invested in diversified securities. Shareholders are issued certificates as evidence of their ownership and participate proportionately in the earnings of the fund.

N

NALU: National Association of Life Underwriters.

NASD: National Association of Securities Dealers.

NFIP: National Flood Insurance Program.

Named insured:
1) A policyholder, the person to whom the policy is issued; any person or corporation, or any member thereof, specifically mentioned as insured in a policy, as distinguished from others, who, though unnamed, are protected under certain circumstances.
2) In life insurance, this is the person named on the face page of the policy whose life is covered by the basic contract. (Other persons may be covered by riders attached to the basic contract).

Named perils: The specific perils that a property coverage insures against, as compared to "all risk" coverage which specifies perils not covered.

National Association of Insurance Commissioners (NAIC): An organization of all state insurance commissioners that meets periodically to discuss insurance industry problems and issues that might require legislation or regulation. It also addresses the need to make the various state laws more uniform for insurance companies and other parties.

National Insurance Crime Bureau (NICB): A not-for-profit organization dedicated to combating insurance-related crime. NICB personnel work in partnership with insurers and law enforcement to identify, investigate and prosecute organized rings, corrupt professionals and repeat offenders.

Negligence: An unreasonable or imprudent act resulting from carelessness, ignorance, thoughtlessness or inaction, but never the intention of an individual. Before a court awards to an injured party for the negligent act of another, four elements of negligence must be present at the same time:

1) There must have been a duty by one party to protect the other party or the other party's property;
2) There must have been a failure to live up to that duty;
3) An actual injury to a person or property must have taken place;
4) The failure to exercise the proper degree of care must be the proximate cause of the injury or damage.

Net cost: Premiums paid minus cash value and any policy dividends paid as of the date the calculation is being made.

Net premiums: The premiums calculated on the basis of a given mortality table and a given rate of interest, without any allowance for loading.

No-fault automobile insurance: An insurance plan providing that after an automobile accident, each party collects from his or her own insurer, regardless of fault.

Nonadmitted assets: Assets that the insurer carries on its books, but that must be deducted from gross assets to determine its financial condition in reporting to a state insurance department. Also, includes adjustments to book value of an asset to bring it into agreement with statutory value.

Noncancelable policy: In health insurance, a policy on which the insurer may not refuse to renew the contract nor can the premium be increased.

Nonconcurrency: The situation which exists when a number of fire or other policies covering the same property are not identical to the forms of coverage afforded. When this situation exists, the adjustment of losses becomes extremely difficult and usually unsatisfactory.

Nonforfeiture options: This term refers to options available under terms of the contract after cash values have been created.

Nonmedical insurance: Life insurance issued on a regular basis without requiring the applicant to submit to a regular medical examination. In passing on the risk, the company relies on the applicant's own answers to questions regarding his/her physical condition and on personal references or inspection reports.

Nonownership liability: This protects the policyholder against claims for bodily injury or property damage liability arising out of the use of automobiles not owned by, but used by his/her employees (or other people) in the course of his/her business.

Nonparticipating policy: A policy under which the policy owner is not entitled to dividends or other refunds.

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