Insurance Glossary

B-SHARE VARIABLE ANNUITY

A type of variable annuity contract with no upfront sales charge. If the contract is canceled early, the holder pays deferred sales charges, typically ranging from 5% to 7% in the first year and declining to zero over five to seven years. This is the most common form of annuity contract.

BALANCE SHEET

A financial statement that provides a snapshot of a company’s financial condition at a specific point in time. It lists assets such as investments and reinsurance, liabilities such as loss reserves, and equity known as policyholder surplus, which reflects the insurer’s financial strength.

BANK HOLDING COMPANY

A company that owns or controls one or more banks. Bank holding companies are regulated by the Federal Reserve, which oversees activities such as mergers, acquisitions, and operational inspections.

BASIS POINT

One-hundredth of one percent (0.01%). A basis point is commonly used to measure changes in interest rates, bond yields, and mortgage rates.

BEACH AND WINDSTORM PLANS

State-sponsored insurance pools that provide windstorm and hurricane coverage to property owners who cannot obtain coverage in the voluntary market due to high risk. Participating insurers share in the profits and losses of these plans.

BINDER

A temporary agreement that provides immediate insurance coverage until a formal policy is issued.

BLANKET INSURANCE

Insurance coverage that applies to multiple properties at one location or similar properties across multiple locations, commonly used by businesses such as chain stores.

BODILY INJURY LIABILITY COVERAGE

A component of an auto insurance policy that pays for injuries caused by the policyholder to other people in an accident.

BOILER AND MACHINERY INSURANCE

Also known as Equipment Breakdown Insurance, this commercial coverage protects against damage caused by the mechanical or electrical breakdown of boilers and other systems such as HVAC, electrical, computer, and communication equipment.

BOND

A financial instrument requiring the issuer to pay interest and repay principal at maturity. In insurance, bonds are a form of suretyship that guarantee payment or reimbursement for losses due to dishonesty, failure to perform, or other specified acts.

BOND RATING

An assessment of a bond’s financial strength and creditworthiness conducted by rating agencies such as Standard & Poor’s and Moody’s Investors Service.

BOOK OF BUSINESS

The total volume of insurance policies written or managed by an insurer or agency at a given time.

BROKER

An intermediary who represents clients rather than insurance companies. Brokers search the market for suitable coverage, typically focus on commercial insurance, and are compensated by commission.

BURGLARY AND THEFT INSURANCE

Coverage that protects against loss of property due to burglary, robbery, or theft. It is included in standard homeowners policies and many commercial insurance policies.

BUSINESS INCOME INSURANCE

Also known as Business Interruption Insurance, this coverage reimburses a business for lost income and ongoing expenses when operations are suspended due to physical damage from a covered peril.

BUSINESSOWNERS POLICY (BOP)

A bundled insurance policy designed for small to medium-sized businesses that combines property, liability, and business income coverages at a lower cost than purchasing separate policies.