Glossary

Full preliminary term reserve valuation refers to a technique in reserving for life insurance in which no reserve is required for the first year of the life of the contract, with this difference being made up over the contract's duration.

Full prior acts coverage is a type of claims-made liability policy that does not contain a retroactive date and, therefore, covers claims arising from acts that took place at any time prior to the inception date of the policy—regardless of how far in the past.

Functional capacity evaluation is a series of tests conducted by a physical or occupational therapist to gain a better quantification of an individual's ability to perform physically in the work environment.

A functional job description is a written document that provides detailed information about the physical requirements of a specific job in the workplace.

Functional replacement cost is the cost of acquiring another item of property that will perform the same function with equal efficiency, even if it is not identical to the property being replaced.

A functional replacement cost provision or endorsement changes the valuation basis otherwise applicable (actual cash value (ACV) or replacement cost (RC) value) to valuation at the cost to replace the damaged or destroyed property with property that serves the same function.

A fundamental risk is intrinsic to the state of being or an absolute hazard producing no uncertainty about whether the loss will occur, making the risk commercially uninsurable.

Funded refers to a financial situation in which there is sufficient sums of money to meet future liabilities.

Funded covers are also known as "time and distance"—that is, no real underwriting risk to the reinsurer, only a credit risk, timing risk, or investment risk. The lump sum prepaid premium equals the reinsurance recoverable, recognizing the time value of money.

A funded pension plan is an actuarially sound pension plan for which reserves are adequate at the time benefits become payable.