variable annuity: An annuity contract under which the monthly payments will vary because they are linked to the values of investments, such as common stocks. This contrasts with the fixed dollar annuity, which guarantees a fixed amount monthly.
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vanishing premium: When a life insurance policy rapidly builds cash value, sometimes the value is sufficient enough to pay the premiums. So, given a certain amount of time, no more premium payments are necessary. This is also known as a “premium offset.” In illegal “vanishing premium” schemes, an agent promises that the premium will vanish but it doesn’t.
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universal life insurance: Unlike traditional cash-value policies (known as “whole life”), universal life policy returns were freed from long-term, fixed-rate contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. In addition, premiums and death benefits can be changed by the policyholder.
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uninsured/underinsured motorists coverage: In the best of all possible worlds, everyone would have adequate auto liability coverage. But there are people who drive around (often illegally) with no insurance or not enough insurance. If one of these folks happens to cause an accident, you might not be able to collect damages. Uninsured/underinsured motorists coverage — usually called UM/UIM coverage — will pay bodily injury costs caused by an uninsured or underinsured motorist. ItÆs a required coverage in some states, and a prudent coverage anywhere. Usually, the limits are the same as the bodily injury portion of your auto liability coverage. UM/UIM coverage can supplement the benefits you can receive under a no-fault system.
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uninsurables: High-risk persons who do not have health care coverage through private insurance and who fall outside the parameters of risks of standard health underwriting practices.
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unearned premium reserve: A reserve equal to an amount of net premium written but not yet earned.
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unearned premium: That portion of a premium already received by the insurer for which protection has not yet been provided.
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underwriting profitability ratio: The ratio of net earned premiums less underwriting expenses and losses divided by net earned premiums.
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underwriting cash flow ratio: The sum of premiums collected net of reinsurance plus other underwriting income divided by the sum of loss and loss adjustment expenses paid plus underwriting expenses paid plus other underwriting expenses.
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underwriting: The underwriting process evaluates the likelihood an insured event will occur, determines its likely cost and develops an appropriate premium for the coverage that is competitive in the marketplace and remunerative to the insurance company writing the policy. For some standardized coverage’s that are highly competitive, underwriting may be somewhat besides the point — the policy has to be priced according to marketplace pressures if the insurer wishes to remain in that line of coverage. Underwriting still plays a substantial role for many coverage’s, however, even those in the increasingly competitive businesses of auto, home and term life insurance. Insurance companies donÆt all target the same slice of the market in the same states, and thus often have different objectives in their underwriting efforts as well as different cost structures that determine operating profit margins in their underwriting calculations. Underwriting differences account in part for the substantial differences in insurance premiums for comparable coverage’s.
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