Rate-Up in Age
System of rating substandard risks that involves assuming the insured to be older than he or she really is and charging a correspondingly higher premium.

Rating
At the beginning of the policy year, the employer provides an estimate of the payroll for the upcoming year. At the end of the policy year the insurer audits the actual payroll, and adjusts the estimated premium up or down accordingly. Payroll is reported by state and also by job category. Rates vary considerably among job categories, so the apportionment of payroll should be carefully reviewed. Higher limits of Employer’s Liability coverage are available for a moderate increase in premium.

Rating - Property
Property insurance premiums are normally based upon the value of your property. Policies require that the values you report must at least be equal to a specified percentage (frequently 90%) of the values of your property. The rate is often expressed as a price per $100 of insured value. Rating formulas are complicated, but they usually include the following considerations:

• Construction - frame, brick, fire resistive, etc.
• Occupancy - the nature of the business(es) that occupy the building.
• Protection - within the building, such as a sprinkler system or watchman, as well as the quality of your community’s Fire Department.
• Exposure - the risks to your property from the surrounding area, such as an adjacent woodworking plant or gas storage facility. Many buildings have a specific property insurance rate assigned by the Insurance Service Office.
• Subjective considerations, such as loss history, upkeep and attitude towards loss prevention also play a role in the rating process. Larger policies have greater flexibility in rating than smaller ones.

Re-entry Option
An option in a renewable term life policy under which the policyowner is guaranteed, at the end of the term, to be able to renew his or her coverage without evidence of insurability, at a premium rate specified in the policy.

Rebating
Returning part of the commission or giving anything else of value to the insured as an inducement to buy the policy. It is illegal and cause for license revocation in most states. In some states, it is an offense by both the agent and the person receiving the rebate.

Reinstatement
Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.

Renewable Term
Some term policies provide that they may be renewed on the same plan for one or more years without medical examination but with rates based on the insured's attained age.

Rental Cars
Some auto insurers offer an endorsement which extends the auto liability coverage to include liability assumed under car rental agreements. This is worth exploring. Auto insurers may also be willing to add coverage for physical damage to rental vehicles. With this coverage, your employees would not have to purchase the expensive Collision Damage Waiver every time they rent a car. In some states, such as Illinois, car rental companies are now required to absorb physical damage losses to their vehicles.

Replacement
Act of replacing one life insurance policy with another; may be done legally under certain conditions. (See twisting.)

Representation
Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief but that are not warranted as exact in every detail.

Rider
Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy's conditions are expanded and additional coverages added, or a coverage or condition is waived.

Risk Retention Group
In 1986, Congress passed the Risk Retention Act to assist businesses that could not obtain liability insurance. The Act allows businesses to form Risk Retention Groups. These Groups provide liability insurance to their member/owners. In effect, they become their own insurance company. Participation in a Risk Retention Group requires sound legal, financial and insurance advice.

Risk Selection
The method a home office underwriter uses to choose applicants that the insurance company will accept. The underwriter must determine whether risks are standard, substandard or preferred and set the premium rates accordingly.

Salary Continuation Plan
An arrangement whereby an income, usually related to an employee's salary, is continued upon his or her death; often paid to the employee's beneficiary.

Section 1035 Exchanges
Certain life insurance policy or annuity exchanges that are considered, according to Internal Revenue Code section 1035, to be tax-free.

Selective Liability Limits
For property insurance, you can determine the value of your property and then purchase sufficient insurance to protect your company from loss. Determining an adequate amount of liability insurance is not as easy. In our society, a lawsuit can follow any serious (and sometimes not-so-serious) accident. Ultimately, it is our courts that assign a dollar value to liability losses. And courts are awarding higher judgments than in the past. All businesses face the possibility of a large liability judgment. Some businesses have always involved dangerous operations or hazardous work. But even businesses that are considered non-hazardous could be involved in a serious loss, such as an automobile accident. Additionally, products that are considered safe today, may be found hazardous in the years to come. Large liability losses are infrequent and consequently they are difficult to predict. However, it is possible that more than one serious event could occur in the same year. Million dollar verdicts are not uncommon. For most businesses, the selection of liability insurance limits is based upon affordability and availability. A limit of $1 million is usually considered the minimum for a small business today. Limits of $5 million and $10 million are not uncommon. Larger businesses carry much more. In short, you should purchase as much liability insurance as you can realistically afford.

Standard Risk
Person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

Stock Redemption Plan
An agreement under which a closely held corporation purchases a deceased stockholder's interest.

Stop Gap Liabilities
Since Monopolistic states do not provide Employer's Liability in their Workers' Compensation policy, it must be purchased separately. Stop Gap Liability provides Employer's Liability coverage for those states. It may also be available as an endorsement to General Liability policies.

Stop-Gap Liability
Normally, this coverage is associated with Workers' Compensation policies, but some insurers add it to the General Liability policy. There are six "monopolistic" states that require you to purchase Workers' Compensation insurance from the state. These states do not sell Employer's Liability coverage, which is normally a part of a Workers' Compensation policy. The Stop-Gap Liability Endorsement provides Employer's Liability coverage for specified monopolistic states.

Sub-Standard Risk
Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Suicide Clause
Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years, after the issue date, the company's liability will be limited to a return of premiums paid.

Term Insurance
Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to twenty years, because such periods usually cover the needs for temporary protection.

Term of Policy
Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance.

Tertiary Beneficiary
In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.

Theft of Money Inside Premises and/or Theft of Money outside Premises
These coverages should be considered by businesses with any accumulation of cash. Other property can also be covered.

Third-Party Owner
A policyowner who is not the prospective insured.

Transit Cargo
This adds coverage for your company's shipments. Bills of lading may limit responsibility of common carriers. Also, purchasing your own insurance can expedite reimbursement.

Twisting
Practice of inducing a policyowner in one company to lapse, forfeit or surrender a life insurance policy for the purpose of taking out a policy in another company. Generally classified as a misdemeanor, subject to fine, revocation of license and sometimes imprisonment.

Umbrella and Excess Liability
Umbrella policies provide additional amounts of insurance over other insurance policies. Typically, umbrella policies go over your Automobile Liability, General Liability and Employer's Liability (part of a Workers' Compensation policy) coverages. Umbrella insurers may agree to go over additional underlying coverages, such as Non-Owned Aircraft Liability. True Umbrella policies are broader than the underlying policies. This means they provide some coverages that the underlying policies do not. Umbrella coverage is often subject to a "Retention" when there is no coverage in the underlying policies. In other words, the Umbrella insurer will only pay such claims when they exceed a certain dollar amount. "Excess" policies do not add additional coverages. They simply provide additional amounts of insurance over the underlying policies. Since portions of the underlying General Liability and Employer's Liability policies limit the amount they will pay in any one policy year (aggregate limit), these policies should have the same policy term (expiration date) as the Umbrella policy.

Underinsured Motorists
Provides coverage if you are involved in an accident with a motorist with insufficient liability insurance. That is, the responsible driver has enough liability insurance to meet the state’s minimum requirements, but not enough to cover a serious injury.

Underwriter
Company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, company employee who decides whether the company should assume a particular risk; or the agent who sells the policy.

Uniform Simultaneous Death Act
Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary.

Unilateral
A distinguishing characteristic of a life insurance contract in that it is only the insurance company that pledges anything. The policyowner does not even promise to pay premiums; therefore, it is really a one-sided contract favoring the policyowner.

Uninsurable Risk
One not acceptable for insurance due to excessive risk.

Uninsured Motorists
Provides coverage under your own policy for the possibility of an accident with an uninsured motorist. For example you sustain serious injuries in an accident, and the responsible party does not have liability insurance.

Universal Life
Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value accounts after the company deducts its fee and a monthly cost for the term coverage.

Valuable Papers
The valuable papers endorsement provides coverage for the additional costs to research or restore damaged documents, drawings or records. It is an important consideration for businesses such as Architects, Graphic Artists and any others that could lose valuable documents in a property loss.

Valuation
Property insurance policies can be written to provide Replacement Cost coverage or Actual Cash Value coverage. Replacement Cost means the cost to repair or replace the damaged property with new property of like kind and quality. Actual Cash Value means that any loss settlement will be depreciated to reflect the age of the property. Most businesses prefer Replacement Cost protection because it achieves a more complete recovery following a loss. However, Actual Cash Value (depreciated) coverage may be appropriate under certain circumstances. For example, the extra cost of Replacement Cost protection may not be justified on an older property that would not be repaired or replaced if seriously damaged. Be sure to discuss this at length.

Voluntary Compensation
This adds coverage for categories of employment not subject to Workers' Compensation laws (such as partners or domestic help - varies from state to state). This endorsement is sometimes used to provide coverage for company sponsored athletic teams. Coverage for such injuries should be discussed in detail with your broker or insurer.

Waiver of Premium
Rider or provision included in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six months.

Watercraft, Wharfs and Docks
Liability arising from the use of watercraft requires specialized insurance policies. Docks and wharfs also impose special liabilities on their owners. Coverage provided under Commercial General Liability (CGL) policies is very limited and intended for incidental use of small non-owned watercraft. All watercraft and wharf exposures should be discussed in detail.

Who is Insured
Automobile policies cover your liability for bodily injury and property damage arising out of the use of a covered auto. These policies can also cover damage to your own vehicles, and several other related types of loss.

Workers' Compensation
Workers' Compensation policies include two basic coverages. The first coverage provides benefits for employees injured on the job. These benefits are determined by state law. The second coverage is Employer's Liability. This section covers suits by employees against their employers for job related accidents. Suits can also come from family members of employees. Workers' Compensation laws often limit the liability of employers to employee suits, but suits are still possible. The Declarations Page (cover sheet) of your policy will show which coverages you have.

Wrongful Termination
The act of terminating an employee in a manner which is against the law. In recent years, erosion of the employment-at-will doctrine has been the factor most responsible for the increase in claims alleging wrongful termination. Coverage for this exposure is provided under employment practices liability policies.