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PACKAGE POLICY
A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.

PAID-UP POLICY
An insurance policy that requires no further premium payments but continues to provide coverage.

PARTIAL DISABILITY
See Residual disability

PARTICIPATING POLICY
A type of insurance policy that allows policy owners to receive policy dividends. Also known as par policy. (See Dividend )

PAY-AT-THE-PUMP
A system proposed in the 1990s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline.

PAYOUT OPTIONS
The methods available to an annuity contract owner for the distribution of the annuity’s accumulated value. (1) The lump sum distribution method allows the contract owner to receive the balance of his account in a single payment. (2) The fixed period option provides that the annuity’s accumulated value will be paid out over a specified period of time. (3) The fixedamount option provides that the annuity’s accumulated value will be paid out in a pre-selected payment amount until the accumulated value is exhausted. (4) A life annuity option provides that periodic income payments will be tied in some manner to the life expectancy of a named individual.

PERIL
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.

PERIOD CERTAIN
The stated period over which an insurer makes periodic benefit payments under an annuity certain.

PERSONAL ARTICLES FLOATER
A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.

PERSONAL INJURY PROTECTION COVERAGE / PIP
Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.

PERSONAL LINES
Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies. (See Commercial lines )

POLICY
A written contract for insurance between an insurance company and policyholder stating details of coverage.

POLICYHOLDERS' SURPLUS
The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.

POLITICAL RISK INSURANCE
Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property.

POLLUTION INSURANCE
Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires. (See Claims-made policy )

POOL
See Insurance pool

PREFERRED RISK CLASS
In insurance underwriting, the group of proposed insureds who represent a significantly lower than average likelihood of loss within the context of the insurer’s underwriting practices. Contrast with declined risk class, standard risk class and substandard risk class.

PREMISES
The particular location of the property or a portion of it as designated in an insurance policy.

PREMIUM
The price of an insurance policy, typically charged annually or semiannually. (See Direct premiums, Earned premium, Unearned premium )

PREMIUM REDUCTION OPTION
An option, available to the owners of participating insurance policies, that allows the insurer to apply policy dividends toward the payment of renewal premiums. (See Dividend)

PREMIUM TAX
A state tax on premiums paid by its residents and businesses and collected by insurers.

PREMIUMS IN FORCE
The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.

PREMIUMS WRITTEN
The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.

PRIMARY COMPANY
In a reinsurance transaction, the insurance company that is reinsured.

PRIMARY MARKET
Market for new issue securities where the proceeds go directly to the issuer.

PRIOR APPROVAL STATES
States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.

PRIVATE MORTGAGE INSURANCE
See Mortgage guarantee insurance

PRODUCT LIABILITY
A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.

PRODUCT LIABILITY INSURANCE
Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.

PROFESSIONAL LIABILITY INSURANCE
Covers professionals for negligence and errors or omissions that injure their clients.

PROOF OF LOSS
Documents showing the insurance company that a loss occurred.

PROPERTY/CASUALTY INSURANCE
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.

PROPERTY/CASUALTY INSURANCE CYCLE
Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.

PROPOSITION 103
A November 1988 California ballot initiative that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location. The initiative changed many aspects of the state’s insurance system and was the subject of lawsuits for more than a decade.

PURCHASING GROUP
An entity that offers insurance to groups of similar businesses with similar exposures to risk.

 


**Information provided by The Insurance Information Institute: www.iii.org**