Glossary

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GAP INSURANCE

An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars. (See Actual cash value )

 

GENERAL ACCOUNT*

An undivided investment account in which insurers maintain funds that support contractual obligations for guaranteed insurance products such as whole life insurance or fixed-rate annuities. Contrast with separate account.

 

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES/GAAP

Generally accepted accounting principles (GAAP) accounting is used in financial statements that publicly held companies prepare for the Securities and Exchange Commission. (See Statutory accounting principles/SAP )

 

GENERIC AUTO PARTS

Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical part produced by the OEM. (See Crash parts, Aftermarket parts, Competitive replacement parts, Original equipment manufacturer parts / OEM )

 

GLASS INSURANCE

Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass and mirrors. Available with or without a deductible.

 

GRACE PERIOD*

(1) For insurance premium payments, a specified length of time following a premium due date within which the renewal premium may be paid without penalty. The length of the grace period is specified in a grace period provision that is found in a life insurance, health insurance, or annuity policy. (2) For purchases made on credit, a period of time between the date of a purchase and the date the lender begins to charge interest during which no interest accrues.

 

GRADED PREMIUM POLICY*

A type of modified-premium whole life policy that calls for three or more levels of annual premium payment amounts, increasing at specified points in time - such as every three years - until reaching the amount to be paid as a level premium for the rest of the life of the policy.

 

GRADUATED DRIVER LICENSES

Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict nighttime driving. Young drivers receive a learner’s permit, followed by a provisional license, before they can receive a standard driver’s license.

 

GRAMM-LEACH-BLILEY ACT

Financial services legislation, passed by Congress in 1999, that removed Depression era prohibitions against the combination of commercial banking and investment banking activities. It allows insurance companies, banks and securities firms to engage in each others’ activities and own one another.

 

GROSS ANNUITY COST*

A monetary amount equal to the present value of future periodic income payments under an annuity contract, calculated on a gross basis, with a specific provision for expense loading. Contrast with net annuity cost.

 

GROUP INSURANCE

A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.

 

GUARANTEE PERIOD

Period during which the level of interest specified under a fixed annuity is guaranteed.

 

GUARANTEED DEATH BENEFIT

Basic death benefits guaranteed under variable annuity contracts.

 

GUARANTEED INCOME CONTRACT / GIC

Often an option in an employer-sponsored retirement savings plan. Contract between an insurance company and the plan that guarantees a stated rate of return on invested capital over the life of the contract.

 

GUARANTEED INSURABILITY (GI) BENEFIT*

A supplementary life insurance policy benefit often provided through a policy rider that gives the policy owner the right to purchase additional insurance of the same type as the life insurance policy that provides the GI benefit on specified option dates. Also known as guaranteed insurability option (GIO).

 

GUARANTEED LIVING BENEFIT

A guarantee in a variable annuity that a certain level of annuity payment will be maintained. Serves as a protection against investment risks. Several types exist.

 

GUARANTEED RENEWABLE POLICY*

An individual health insurance policy that requires the insurer to renew the policy—as long as premium payments are made—at least until the insured attains a specified age. The insurer can change premium rates for broad classes of insureds but not for an individual insured. Contrast with noncancellable and guaranteed renewable policy.

 

GUARANTEED REPLACEMENT COST COVERAGE

Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit. (See Extended replacement cost coverage )

 

GUARANTY FUND

The mechanism by which solvent insurers ensure that some of the policyholder and third-party claims against insurance companies that fail are paid. Such funds are required in all 50 states, the District of Columbia and Puerto Rico, but the type and amount of claim covered by the fund varies from state to state. Some states pay policyholders’ unearned premiums—the portion of the premium for which no coverage was provided because the company was insolvent. Some have deductibles. Most states have no limits on workers compensation payments. Guaranty funds are supported by assessments on insurers doing business in the state.

 

GUN LIABILITY

A legal concept that holds gun manufacturers liable for the cost of injuries caused by guns. Several cities have filed lawsuits based on this concept.