Glossary of Insurance Terms

This attention to detail is essential for accurate financial reporting and compliance. Remember, the specific treatment of expenses may vary depending on the accounting method used (accrual or cash basis) and the nature of the business. Always consult with a qualified accountant or financial advisor for guidance on your specific situation. An expense can be incurred when a company becomes legally obligated to pay, even if no goods or services have been received yet.

Panel Discussion on Homeowner’s Property Insurance Cost Drivers

If a court rules that a company must pay damages or fines, the expense is incurred when the judgment is made, not when it’s paid. For example, if a company receives a shipment of goods in December but doesn’t pay for them until January, the expense would be recorded in December’s financial statements under accrual accounting. Understanding expense incurrence is essential for various financial processes, including budgeting, forecasting, and performance evaluation. Mastering this concept empowers businesses to make informed decisions, optimize costs, and maintain a strong financial standing in today’s competitive environment.

Best Practices For Tracking And Recording Incurred Expenses

Fraternal Insurance – a form of group coverage or disability insurance available to members of a fraternal organization. Federal Flood Insurance – coverage for qualifying residents and businesses in flood prone is insurance expense a debit or credit regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968. Excess Workers’ Compensation  – either specific and/or aggregate excess workers’ compensation insurance written above an attachment point or self-insured retention. Equity Indexed Annuity – a fixed annuity that earns interest or provides benefits that are linked to an external reference or equity index, subject to a minimum guarantee. EDP Policies – coverage to protect against losses arising out of damage to or destruction of electronic data processing equipment and its software.

• The Reinsurer shall have the right to investigate each such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defenses which it may deem available to the Company or its liquidator.
• Some words and/or phrases may be defined differently by other entities, or used in a context such that the definition shown may not be applicable.
• Derivative – securities priced according to the value of other financial instruments such as commodity prices, interest rates, stock market prices, foreign or exchange rates.
• Excludes amounts attributable to uninsured accidents and health plans and the uninsured portion of partially insured accident and health plans.
• The DCA also noted that “because ‘incur’ is not defined, ‘it should be given its plain and ordinary meaning’ in the context presented.” Id. citing to Gov’t Emps.
• Specified Disease Coverage – coverage that provides primarily pre-determined benefits for expenses of the care of cancer and/or other specified diseases.

Principle Based Reserving

Loss Reserves – an estimate of liability or provision in an insurer’s financial statement, indicating the amount the insurer expects to pay for losses incurred but not yet reported or reported claims that haven’t been paid. Irrevocable Beneficiary – a life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured’s lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent. Incontestability Provision – a life insurance and annuity provision limiting the time within which the insurer has the legal right to void the contract on grounds of material misrepresentation in the policy application. Health Plan – written promise of coverage given to an individual, family, or group of covered individuals, where a beneficiary is entitled to receive a defined set of health care benefits in exchange for a defined consideration, such as a premium. Health Insurance – a generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or illness including related medical expenses.

• Community Rating – a rating system where standard rating is established and usually adjusted within specific guidelines for each group on the basis of anticipated utilization by the group’s employees.
• Credit Involuntary Unemployment – credit insurance that provides a monthly or lump sum benefit during an unpaid leave of absence from employment resulting from specified causes, such as layoff, business closure, strike, illness of a close relative and adoption or birth of a child.
• Disability Income – Short-Term – policies that provide a weekly or monthly income benefit for up to five years for individual coverage and up to one year for group coverage for full or partial disability arising from accident and/or sickness.
• Often, the fronting insurer is licensed to do business in a state or country where the risk is located, but the reinsurer is not.

• Implement a best business expense tracker software to automate expense reporting and approval processes, and use mobile apps for real-time expense capture and receipt scanning.
• A business spends $12,000 in advance for liability insurance coverage for the next twelve months.
• Several key events or actions can trigger the recognition of an expense, each playing an important role in maintaining accurate financial records.
• This statement is used by the NAIC, and by State Insurance Commissioners to regulate an insurance company according to reserve requirements, assets, and other liabilities.
• Premiums Net – is the amount calculated on the basis of the interest and mortality table used to calculate the reporting entity’s statutory policy reserves.

Term Insurance – life insurance payable only if death of Accounting for Churches insured occurs within a specified time, such as 5 or 10 years, or before a specified age. Subrogation – situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party. Statutory Accounting – method of accounting standards and principles used by state regulatory authorities to measure the financial condition of regulated companies and other insurance enterprises. This method tends to be more conservative than the Generally Accepted Accounting Principles used by most businesses.

Does Claims incurred include IBNR?

This oversight can result in underreported expenses, inaccurate financial statements, and missed opportunities for cost savings. One of the most common pitfalls in expense management is the incorrect categorization of expenses. Categorizing business expenses accurately is essential for proper financial reporting and tax compliance. By mastering this concept, businesses can improve their financial management, enhance transparency, and build trust with investors, creditors, and other stakeholders. Proper expense recognition is a cornerstone of sound financial practices and contributes significantly to a company’s overall financial health and reputation. By carefully evaluating each expense and its unique circumstances, businesses can ensure they’re presenting a true and fair view of their financial position.

Under the cash basis of accounting, the expenditure is charged to expense as soon as cash is paid to the insurance provider. Policy Dividend – a refund of part of the premium on a participating life insurance policy. Amount of payment is determined by subtracting the actual premium expense from the premium charged. The payment can be taken as cash, applied to a purchase an bookkeeping increment of paid-up insurance, left on deposit with the insurance company or applied to purchase term insurance for one year.