Suburban Insurance
Insurance Agency and Brokerage
Serving Pennsylvania & New Jersey

Insurance Glossary

Insurance Glossary

This glossary provides a comprehensive list of the most commonly used terms in property/casualty insurance.
Some life and health insurance terms are included. This is not an all-conclusive glossary of terms.

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Face Amount:
See Protection Amount.

Facultative Reinsurance:
Reinsurance on an individual policy basis wherein each risk which an insurance company wishes to reinsure is reviewed by the reinsurer, which has the “faculty” or option to accept or decline all or part of each risk offered to it.

FAIR (Fair Access to Insurance Requirements) Plan:

A facility, operating under a government-insurance industry cooperative program, to make fire insurance and other forms of property insurance readily available to persons who have difficulty obtaining such coverage.

Family Auto Insurance:
The automobile policy (most common in the industry) which provides protection for the insured and resident relatives in the same household.

Family Plan Insurance:

This is insurance in which the head of the household has one master policy on his/her life (usually whole life) and term coverage for wife/husband and children in lesser amounts.

Farm-Ranchowners Insurance:
Package policy that protects the policyholder against named perils and liabilities and usually covers homes and their contents, along with barns, stables, and other structures.

Federal Crime Insurance:
Insurance against burglary, larceny and robbery losses offered by the federal government where the Federal Insurance Administration has determined that such insurance is not otherwise readily available.

Federal Insurance Administration:
Federal agency in charge of administering the National Flood Insurance Program. It does not regulate the insurance industry.

Federal Reserve Board:
Seven-member board that supervises the banking system by issuing regulations controlling bank holding companies and federal laws over the banking industry. It also controls and oversees the U.S. monetary system and credit supply.

Fee For Service (FFS):
Formerly a standard health insurance policy. Now a form of health insurance that allows the insured to go to any doctor, hospital or other provider which would bill for each service given, and the insurer and the patient share in the cost of the services provided.

Fidelity Bond:
A form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

Fiduciary Bond:
A type of surety bond, sometimes called a probate bond, which is required of certain fiduciaries, such as executors and trustees, that guarantees the performance of their responsibilities.

Fiduciary Liability:
Legal responsibility of a fiduciary to safeguard assets of beneficiaries. A fiduciary, for example a pension fund manager, is required to manage investments held in trust in the best interest of beneficiaries. Fiduciary liability insurance covers breaches of fiduciary duty such as misstatements or misleading statements, errors and omissions.

File-and-Use States:
States where insurers must file rate changes with their regulators, but don’t have to wait for approval to put them into effect.

Financial Guarantee Insurance:
Covers losses from specific financial transactions and guarantees that investors in debt instruments, such as municipal bonds, receive timely payment of principal and interest if there is a default. Raises the credit rating of debt to which the guarantee is attached. Investment bankers who sell asset-backed securities, securities backed by loan portfolios, use this insurance to enhance marketability. (See Municipal Bond Insurance.)

Financial Responsibility Law:
A state law which may require motorists to furnish evidence, either before or after involvement in an auto accident (depending on the individual state’s law), of ability to pay for damages up to certain minimum dollar limits. These requirements commonly are met by carrying auto liability insurance with specified minimum limits or more.

Finite Risk Reinsurance:
Contract under which the ultimate liability of the reinsurer is capped and on which anticipated investment income is expressly acknowledged as an underwriting component. Also known as Financial Reinsurance because this type of coverage is often bought to improve the balance sheet effects of statutory accounting principles.

Fire Insurance:
Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.

First-Party Coverage:
Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services. (See No-Fault; Third-Party Coverage.)

Fleet Policy:
An auto policy covering a number of vehicles owned by a single insured.

A form of insurance that applies to movable property, whatever its location, within the territorial limits imposed by the contract. The coverage “floats” with the property.

Flood Insurance:
Coverage against loss resulting from the flood peril, widely available under a program developed in 1968 by the private insurance industry and the federal government.

Forced Place Insurance:
Insurance purchased by a bank or creditor on an uninsured debtor’s behalf so if the property is damaged, funding is available to repair it.

Foreign Insurance Company:
In a given state, an insurer domiciled in another state.

Fraternal Benefit Society:
An organization that exists to provide social and insurance benefits to its members. In such a society, members often share a common religious, ethnic or vocational background, although some fraternals are open to the general public.

Intentional concealment or misrepresentation with the objective of forcing an insurer to provide a benefit (such as paying a claim) which otherwise would not be provided.

Number of times a loss occurs. One of the criteria used in calculating premium rates. 


A procedure in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission. Often, the fronting insurer is licensed to do business in a state or country where the risk is located, but the reinsurer is not. The reinsurer in this scenario is often a captive or an independent insurance company that cannot sell insurance directly in a particular country.

Funded Reserve:

Bookkeeping account of sums set aside periodically by a business for the purpose of paying for losses as they occur. Usually, the sums are invested conservatively.