Insurance Glossary

EARLY WARNING SYSTEM

A regulatory system used to monitor insurers’ financial stability. One example is the Insurance Regulatory Information System (IRIS), which analyzes financial ratios to identify insurers that may require regulatory attention.

EARNED PREMIUM

The portion of an insurance premium that applies to the expired part of the policy term. Although premiums are paid in advance, they are earned over the life of the policy.

EARTHQUAKE INSURANCE

Insurance coverage that protects buildings and their contents against earthquake damage. Coverage typically includes high deductibles and must be purchased as a separate policy or endorsement.

ECONOMIC LOSS

The total financial loss resulting from death, disability, or property destruction, including lost income, medical expenses, funeral costs, repair or replacement costs, and legal expenses.

ELECTRONIC COMMERCE (E-COMMERCE)

The buying and selling of goods and services, including insurance products, through the Internet.

ELIMINATION PERIOD

A waiting period in disability insurance policies during which benefits are not payable, beginning from the onset of illness or injury.

EMPLOYEE DISHONESTY COVERAGE

Insurance coverage that protects businesses against losses caused by fraudulent or dishonest acts committed by employees.

EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA)

A federal law that establishes minimum standards for private-sector employee benefit plans, including retirement and health plans.

EMPLOYER’S LIABILITY

Part B of a workers compensation policy that provides coverage for lawsuits brought by injured employees under certain legal circumstances.

EMPLOYMENT PRACTICES LIABILITY COVERAGE

Insurance that protects employers against claims alleging wrongful termination, discrimination, harassment, or other employment-related violations.

ENDORSEMENT

A written document attached to an insurance policy that modifies coverage, terms, or conditions. Also known as a rider.

ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE

Coverage designed to protect businesses against liability and cleanup costs resulting from pollution or environmental damage.

EQUITY

Ownership interest in a corporation, represented by stocks rather than debt instruments such as bonds.

EQUITY INDEXED ANNUITY

A type of fixed annuity that guarantees a minimum interest rate while offering potential additional returns linked to the performance of a market index such as the S&P 500.

ERRORS AND OMISSIONS COVERAGE (E&O)

Professional liability insurance that protects individuals and businesses against claims arising from negligent acts, errors, or omissions.

ESCROW ACCOUNT

An account held by a lender to collect funds for paying homeowners insurance premiums, mortgage insurance, and property taxes on behalf of the borrower.

EXCESS AND SURPLUS LINES

Insurance coverage placed with non-admitted insurers when protection is unavailable from insurers licensed in the state.

EXCESS OF LOSS REINSURANCE

A reinsurance agreement in which the reinsurer covers losses exceeding a specified amount retained by the primary insurer.

EXCLUSION

A provision in an insurance policy that removes coverage for certain risks, conditions, individuals, or property.

EXCLUSIVE AGENT

An insurance agent who represents only one insurer and is contractually restricted from placing business with other companies.

EXCLUSIVE REMEDY

A principle of workers compensation law under which injured employees receive benefits regardless of fault and, in return, give up the right to sue their employer.

EXPENSE RATIO

The percentage of premium income used to cover an insurer’s operating expenses such as commissions, marketing, and administrative costs.

EXPERIENCE

An insurer’s historical record of losses, often used to evaluate risk and determine premiums.

EXPOSURE

The potential for loss or damage that may be insured against.

EXTENDED COVERAGE

An endorsement or policy provision that expands coverage beyond what is provided in a basic insurance policy.