tecis

Policy Terms

Cancellations:

Pro Rata-

A pro rata cancellation equates to days in effect and the corresponding premium for this period.

Short Rate-

With a short rate cancellation, there is a penalty imposed for the insured canceling (including by non-payment of premium) the policy prior to the expiration of the policy. This helps offset the expenses of issuing the policy that the insurer typically amortizes over the life of the policy

Combination of Entities

Entities can only be combined when there is common ownership. Common ownership is defined as more than 50%. Partnerships are owned equally based on the number of general partners. How much a partner has invested financially has no relevance in this subject.

Experience Modification (Ex-Mod)

A mathematical comparison between expected losses and actual incurred losses expressed as a percentage. This is calculated by the Workers Compensation Insurance Rating Bureau, and is designed to reward employers that provide a safe working environment

Earned Premium

The portion of written premium (full policy premium); which relates to the period of coverage that has already been provided.
For example, if a policy is issued effective 1-1-XX, for twelve months with a premium of $1,200. The earned premium on 4-1-XX is $300 because three months of coverage has already been provided. Three months of the premium is now earned by the company, earned because the coverage for that three-month period has been provided. The difference between collected and earned premium is Unearned Premium (a liability) for the insurer and prepaid insurance (an asset) for the customer.

Governing Classification

Is the classification with the highest payroll amount, excluding payrolls for clerical office employees and/or outside salespersons.

Loss Ratio

The ratio of incurred losses to earned premium. Incurred losses include both paid to date dollars and remaining funds set side for anticipated future claim costs. The ratio of incurred losses and underwriting expenses to premium is called the Combined Ratio

Officer Exclusion under a WC Policy

Corporation:

There are three criteria used to determine exclusion eligibility:

1. The excluded office must be empowered as president, vice president, assistant vice president, secretary, assistant secretary, treasurer, assistant treasurer and shall include any other executive officers enumerated in and empowered by the corporation's charter,
2. The excluded officer must hold at least one percent of the corporation's stock,
3. All of the corporation's stock must be held within the ownership of the officers (A closed corporation).

Limited Liability Corporation (LLC)

Only managing members of a limited liability company are eligible.

Partnership

Only General partners are eligible for exclusion. Limited partners are not eligible for exclusion

Trust

Grantors of the trust. While the grantor is alive, some often refer to the grantor as the trustees. The grantor(s) is (are) the parties who took out the trust. The trustees are the individuals who will execute the trust when all grantors are no longer alive.

Sole Proprietorship

Sole proprietors are automatically excluded under the WC act and can only be brought into coverage by a specific coverage endorsement at the election of the carrier.

Subrogation

Is the act of seeking reimbursement from a responsible entity where the party not at fault was required to make an initial payment.

Waiver of Subrogation

Waiving subrogation against a responsible party who may have caused or contributed to an injury to an insured's employee could increase an insured's experience modification when the carrier cannot recover from the waived entity. Waiving subrogation is not always a benefit to a policyholder.