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TriTech Services Insurance Tax

  • Tax Glossary



    TriTech Services, Inc. - Tax Glossary
     
           

     

    Rated policy:

    An insurance policy issued at a higher-than-standard premium rate to cover extra risk, as when the insured has impaired health or a hazardous occupation. Also known as extra-risk policy.

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    Reciprocal Insurance Exchange:

    An unincorporated groups of individuals, firms or corporations, commonly termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney-in-fact.

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    Reduced paid-up insurance:

    A form of insurance available as a non-forfeiture option providing for continuation of the original insurance plan at a reduced amount.

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    Re-Entry:

    Re-entry, which is the allowance for level-premium term policy owners to qualify for another level-premium period, generally with new evidence of insurability.

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    Reinstatement:

    The restoration of a lapsed insurance policy. The company requires evidence of insurability and payment of past-due premiums plus interest.

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    Reinsurance Ceded:

    The unit of insurance transferred to a reinsurer by a ceding company.

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    Reinsurance Recoverables to Policyholder Surplus:

    Measures a company's dependence upon its reinsurers and the potential exposure to adjustments on such reinsurance. Its determined from the total ceded reinsurance recoverables due from non-U.S. affiliates for paid losses, unpaid losses, losses incurred but not reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent of policyholder surplus.

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    Reinsurance:

    The transfer of some or all of an insurance risk to another insurer. The company transferring the risk is called the ceding company; the company receiving the risk is called the life assuming company or reinsurer. In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.

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    Reinsure:

    To transfer the risk of potential loss from one insurer to another insurer.

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    Renewable term insurance:

    Term insurance that can be renewed at the end of the term, at the policyholder's option and without evidence of insurability, for a limited number of successive terms. Rates increase at each renewal as the insured ages.

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    Renewal:

    The automatic re-establishment of in-force status effected by the payment of another premium.

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    Replacement Cost:

    The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

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    Reserve:

    The amount required to be carried as a liability on an insurer's financial statement representing actual or potential liabilities kept by an insurer to cover debts to policyholders.

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    Residual Benefit:

    In disability insurance, a benefit paid when you suffer a loss of income due to a covered disability or if loss of income persists. This benefit is based on a formula specified in your policy and it is generally a percentage of the full benefit. It may be paid up to the maximum benefit period.

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    Retrocede:

    To cede insurance risk from one reinsurer to another reinsurer.

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    Retrocessionaire:

    A reinsurer that contractually accepts from another reinsurer a portion of the ceding company's underlying risk. The transfer is known as a retrocession.

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    Return on Policyholder Surplus (Return on Equity):

    The sum of after-tax net income and unrealized capital gains, to the mean of prior and current year-end policyholder surplus, expressed as a percent. This ratio measures a company's overall after-tax profitability from underwriting and investment activity.

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    Return-to-work program:

    A program that helps persons with activity limitations return to work. Assistance may involve maximizing medical improvement to diminish the effect of limitations, or facilitating job or job-site accommodations, retraining, or other means of taking activity limitations into account.

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    Rider:

    An amendment to an insurance policy that expands or restricts the policy's benefits or excludes certain conditions from coverage. See accelerated death benefit and accidental death benefit.

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    Risk Class:

    Risk class, in insurance underwriting, is a grouping of insured's with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.

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    Risk classification:

    The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of persons insured—their age, occupation, gender, and health status, for example—and how the resulting rules are applied to individual applications. See underwriting.

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    Risk Management:

    Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

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    Risk Retention Groups:

    Liability insurance companies owned by their policyholders. Membership is limited to people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability. These entities are formed under the Liability Risk Retention Act of 1986. Under law, risk retention groups are precluded from writing certain coverages, most notably property lines and workers' compensation. They predominately write medical malpractice, general liability, professional liability, products liability and excess liability coverages. They can be formed as a mutual or stock company, or a reciprocal.

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    Risk-based capital (RBC):

    Method developed by the National Association of Insurance Commissioners to measure the minimum amount of capital that an insurance company needs to support its overall business operations. RBC sets capital requirements that consider the size and degree of risk taken by the insurer and presumes that stakeholders will still receive limited payment should insolvency occur. RBC has four components:

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    Roth IRA:

    An individual retirement account (IRA) in which earnings on contributions are not taxed at distribution, as long as the contributions have been in the account for five years and the account holder is at least age 59 1/2, disabled, or deceased. Contributions to a Roth IRA are not tax-deductible.

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