Glossary of Insurance Terms
The language of insurance has its own terminology and meanings. Below are some terms which are often used in connection with our Program:
CLAIM (LOSS): A formal request for investigation and/or payment related to an occurrence that may be covered under an insurance policy.
FREQUENCY: The number of claims during a Policy Year.
(TOTAL) INCURRED LOSSES: The total dollar amount of losses associated with insured claims during a given time period. This includes the portion of claims that have been paid out, as well as the insurance carrier estimate of the remaining portion to be paid (reserved).
LIMITED LOSSES: The total dollar amount of losses which are paid or reserved within the retentions.
LOSS RATIO: The ratio of (x) incurred losses including the costs relating to those losses (known as “loss adjustment expense”) to (y) premiums.
PAID LOSSES: The actual amount(s) paid to claimants as insurance claim settlements and related expense.
PREMIUM: The amount paid to the insurance carrier for the purchase of insurance coverage.
RETENTION: Funds which are provided by the insured and are used to pay claims up to a pre-determined amount.
RESERVED LOSSES: The estimated or expected amount to be paid in the future of a claim.
POLICY YEAR: The period covered by an insurance policy. For the NRMC Program, the policy years run from April 1 to April 1.
SEVERITY: The cost of a claim.