DEDUCTIBLE - The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.

DEMUTUALIZATION - The conversion of insurance companies from mutual companies owned by their policyholders into publicly-traded stock companies.

DEREGULATION - In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.

DIRECT SALES/ DIRECT RESPONSE - Method of selling insurance directly to the insured through an insurance company's own employees, through the mail, or via the Internet. This is in lieu of using captive or exclusive agents.

DIRECT WRITERS - Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, or via Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.

DOMESTIC INSURANCE COMPANY - Term used by a state to refer to any company incorporated there.

EARTHQUAKE INSURANCE - Covers a building and its contents, but includes a large percentage deductible on each. A special policy exists because earthquakes are not covered by standard homeowners or most business policies.

ECONOMIC LOSS - Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property, and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.

ELECTRONIC COMMERCE / E-COMMERCE - The sale of products such as insurance over the Internet.

ENDORSEMENT - A written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Sometimes called a rider.

ESCROW ACCOUNT - Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.

EXCESS & SURPLUS LINES - Property/casualty coverage that isn't available from insurers licensed by the state (called admitted insurers) and must be purchased from a non-admitted carrier.

EXCLUSION - A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

EXCLUSIVE AGENT - A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent's company.

EXPENSE RATIO - Percentage of each premium dollar that goes to insurers' expenses including overhead, marketing, and commissions.

EXPERIENCE - Record of losses.

EXPOSURE - Possibility of loss.

EXTENDED COVERAGE - An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.

FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS - Insurance pools that sell property insurance to people who can't buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot, and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses.

FEDERAL INSURANCE ADMINISTRATION / FIA - 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.

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 RESPONSIBILITY LAW - A state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if involved in an auto accident. Varies from state to state but can be met by carrying a minimum amount of auto liability insurance.

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.

FLOOD INSURANCE - Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy.

FOREIGN INSURANCE COMPANY - Name given to an insurance company based in one state by the other states in which it does business.

FRAUD - Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents, and brokers for financial gain.

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