Abandoment: As used in property insurance, prohibits the
insured from abandoning damaged property to the insurance company for repair or
Accounts Receivable Coverage: Covers loss of sums owed to
the insured by its customers that are uncollectible due to damage by an insured
peril to accounts receivable records.
Actual Cash Value (ACV): Cost to repair or replace damaged
property with materials of like kind and quality, less depreciation.
Additional Insured: A person or organization for whom insured
status is arranged by endorsement.
Advertising Injury: General liability coverage that insures
against libel, slander, invasion of privacy, copyright infringement and misappropriation
of advertising in connection with the insured’s advertising of its goods or services.
Aggregate: The maximum amount an insurance company will pay
during the policy.
All Risk Coverage: Property insurance covering loss arising
from all causes of loss except those that are specifically excluded.
Application: A form with all the information needed for an
insurance company to underwrite and rate a specific policy.
Audit: A verification of the financial records, usually payroll
or receipts, of an organization to determine exposures and premiums.
Automobile: A land motor vehicle, trailer or semi-trailer
designed for travel on public roads, not including mobile equipment.
Bailee Coverage: Coverage on property left in the care of the insured for storage,
repair or servicing.
Basic Cause of Loss Form: Property coverage for named perils:
Fire, Lightening, Explosion, Smoke, Windstorm, Hail, Riot, Civil Commotion, Aircraft,
Vehicles, Vandalism, Sprinkler Leakage, Sinkhole Collapse and Volcanic Action.
Basic Limits: The minimum limits of liability that can be carried by an insured
Best’s Rating: A rating system by A.M. Best Company giving the financial condition of insurance
Binder: A legal agreement issued on behalf of insurance companies to provide
temporary evidence of insurance until a policy can be issued.
Bodily Injury by Accident Limit (Workers’ Compensation): The most an insurer will pay under Part Two of a
Workers’ Compensation Policy for claims arising out of any one accident, regardless
of how many employee claims arise out of the accident.
Bodily Injury by Disease - Each Employee (Workers’ Compensation): The most an insurer will pay under Part Two
of a Workers’ Compensation Policy for damages due to bodily injury by disease to any one employee.
Bodily Injury by Disease - Policy Limit (Workers’ Compensation):
The most an insurer will pay under Part Two of a Workers’ Compensation Policy employee
bodily injury by disease claims during the policy period regardless of the number
of employees who make such claims.
Bodily Injury Liability Limits: The insured is legally liable for damages due to bodily injury, sickness, or disease, including
Boiler & Machinery Insurance: Coverage for loss caused by mechanical
or electrical equipment breakdown, including damage to the equipment.
Bond:A written agreement in which one party, the surety, guarantees the performance or honesty
of a second party, the principal (obligor), to the third party (oblige) to whom the performance or debt is owed.
Brands and Labels Endorsement: Property insurance coverage that allows the insured to remove labels from damaged goods or mark the
items as salvage, provided the goods are not damaged in the process.
Broad Causes of Loss Form: Property coverage for the named perils: Fire, Lightening, Explosion,
Smoke, Windstorm, Hail, Riot, Civil Commotion, Aircraft, Vehicles, Vandalism, Sprinkler
Leakage, Sinkhole Collapse, Volcanic Action, Breakage of Building Glass, Falling
Objects, Weight of Snow, Ice or Sleet, Water Damage (in the form of leakage from
appliances) and Collapse from Specified Causes.
Building Ordinance Coverage: Covers against loss caused by enforcement or ordinances or laws regulating construction
and repair of damaged buildings
Burglary: Theft of property by forcible entry, which
is evidenced by visible signs, in a premises, by a person.
Business Auto Policy: Auto Policy for businesses that includes auto liability and auto physical damage
Business Income Coverage: Insurance covering loss of income by a business
when operations are interrupted due to property loss that is a covered cause of
Business Interruption Coverage: See Business Income Coverage.
Business Owners Policy (BOP): A Policy that combines property and liability coverage’s for special
types of small businesses.
Capital: Equity of shareholders of a stock insurance company. The company's capital and surplus are measured by
the difference between its assets minus its liabilities. This value protects the
interests of the company's policyowners in the event it develops financial problems;
the policyowners' benefits are thus protected by the insurance company's capital.
Shareholders' interest is second to that of policyowners.
Capitalization or Leverage: Ensures the exposure of a company's surplus to various operating and financial practices.
A highly leveraged, or poorly capitalized, company can show a high return on surplus,
but might be exposed to a high risk of instability.
Captive Agent: Representative
of a single insurer or fleet of insurers who is obliged to submit business only
to that company, or at the very minimum, give that company first refusal rights
on a sale. In exchange, that insurer usually provides its captive agents with an
allowance for office expenses as well as an extensive list of employee benefits
such as pensions, life insurance, health insurance, and credit unions.
Case Management: A system
of coordinating medical services to treat a patient, improve care and reduce cost.
A case manager coordinates health care delivery for patients.
Casualty: Liability or loss resulting from an accident.
Casualty Insurance: That type of insurance that is primarily concerned with losses caused by injuries to
persons and legal liability imposed upon the insured for such injury or for damage
to property of others. It also includes such diverse forms as plate glass, insurance
against crime, such as robbery, burglary and forgery, boiler and machinery insurance
and Aviation insurance. Many casualty companies also write surety business.
Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by
Coinsurance: In property insurance, requires the policyholder to carry insurance equal to a specified percentage
of the value of property to receive full payment on a loss. For health insurance,
it is a percentage of each claim above the deductible paid by the policyholder.
For a 20% health insurance coinsurance clause, the policyholder pays for the deductible
plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling,
the insurer starts paying 100% of losses.
Collision Insurance: Covers physical damage to the insured's automobile (other than that covered under comprehensive
insurance) resulting from contact with another inanimate object.
Commercial Lines: Refers to insurance for businesses, professionals and commercial establishments.
Comprehensive Insurance: Auto insurance coverage providing protection in the event of physical damage (other
than collision) or theft of the insured car. For example, fire damage or a cracked
windshield would be covered under the comprehensive section.
Coverage: The scope of protection
provided under an insurance policy. In property insurance, coverage lists perils
insured against, properties covered, locations covered, individuals insured, and
the limits of indemnification. In life insurance, living and death benefits are
Death Benefit: The limit of insurance or the amount of benefit that will be paid in the event of the death
of a covered person.
Deductible: Amount of loss that the insured pays before the insurance kicks in.
Dividend: The return of part
of the policy's premium for a policy issued on a participating basis by either a
mutual or stock insurer. A portion of the surplus paid to the stockholders of a
Earned Premium: The amount
of the premium that as been paid for in advance that has been "earned" by virtue
of the fact that time has passed without claim. A three-year policy that has been
paid in advance and is one year old would have only partly earned the premium.
Elimination Period: The time
which must pass after filing a claim before policyholder can collect insurance benefits.
Also known as "waiting period."
Employers Liability Insurance: Coverage against common law liability of an employer for accidents to employees,
as distinguished from liability imposed by a workers' compensation law.
Encumbrance: A claim on property,
such as a mortgage, a lien for work and materials, or a right of dower. The interest
of the property owner is reduced by the amount of the encumbrance.
Exclusions: Items or conditions that are not covered by the general insurance contract.
Expense Ratio: The ratio
of underwriting expenses (including commissions) to net premiums written. This ratio
measures the company's operational efficiency in underwriting its book of business.
Exposure: Measure of vulnerability to loss, usually expressed in dollars or units.
Fiduciary Liability: The liability placed on trustees, employers, fiduciaries and
professional administrators with respect to errors and omissions in the administration
of employee benefit programs.
Fine Arts Coverage: Property insurance for works of art.
Fire Department Service Charge Coverage: Coverage in a property insurance policy
for charges incurred by the insured from a fire department for their services in
fighting a fire.
Fire Legal Liability Coverage: Liability coverage for the insured’s
legal liability for fire damage to premises rented by the insured.
Fire Wall: A wall designed to prevent the spread of fire from one part of a building to another.
Flat Cancellation: The full cancellation of a policy as of the effective date of
coverage which requires the return of paid premium in full.
Flood Coverage: Coverage for damage to property caused by flood.
Flood Exclusion: A provision in most all property insurance policies eliminating coverage for damage by flood and possibly
other types of water damage, such as seepage and sewer backup.
Follow Form: An umbrella policy provision that follows the underlying policy for coverage’s and policy provisions.
Forgery or Alteration Coverage: Covers loss due to the dishonesty of writing, signing
or altering of checks and bank drafts.
Fortuitous Event: An event that is subject to chance without the implication of suddenness.
Frequency: The number of times that a loss will occur within any given period of time.
Full Coverage: Any form of insurance that provides payment in full of all losses caused by the perils insured against
without applying a deductible or depreciation.
Garage Liability Insurance: Insurance coverage for the legal liability of automobile
dealers, garages, repair shops and service stations for bodily injury and property
damage arising out of their business operations.
Garage-keepers Coverage: Provides coverage to the owners of storage garages,
parking lots and body and repair shops for their liability of damage to automobiles left in their custody for safekeeping
General Aggregate Limit: The maximum amount of insurance payable during
the policy period for losses (other than those arising from the products – completed
operations hazards as covered under the standard commercial general liability policy)
General Liability Insurance: Insurance protecting businesses from most liability
exposures other than automobile and professional liability.
Glass Insurance: A property insurance policy covering breakage of building glass regardless of cause.
Governing Classification: In Workers’ Compensation Insurance, the classification that best
describes the workers’ compensation exposure of an employer’s business.
Gross Negligence: Willful and wanton misconduct.
Gross Vehicle Weight (GVW): The weight specified by a manufacturer for the maximum total loaded weight of a single vehicle.
Hired Automobile: An automobile whose exclusive use has been temporarily given to another for a monetary sum or other consideration. The business auto definition of ‘hired autos,’ however, includes auto borrowed except those borrowed from employees or partners.
Hold Harmless Agreement: A contractual agreement that requires one contracting party to assume certain legal liabilities of the other party.
Host Liquor Liability: Liability coverage for hosts of business or social functions arising out of the serving or distribution of alcoholic beverages by a party not engaged in this activity as a business enterprise.
Improvement and Betterments: Additions or changes made by a lessee at his own expense to property that may not legally be removed, usually covered under the tenants property coverage.
Incurred Losses: The amount of paid claims and loss reserves within a particular period of time, usually a policy year. Customarily computed as losses incurred during the period, plus outstanding losses at the end of the period, less outstanding losses at the beginning of the period.
Independent Adjuster: A claims adjuster who provides adjustment services to insurance companies but is not employed by them.
Independent Contractor: An individual or company who has agreed, in writing, with another party to perform a job or function on behalf of that party.
Inflation Guard Provision: A provision that increases the limit of insurance by a specified percentage over a specified period of time to offset inflation costs.
Insurance to Value: Insurance written in an amount equal to the value of the property or which meets coinsurance requirements.
Insurer: An insurance company that provides insurance coverage and other insurance related services.
Joint Venture: A business relationship when two or more persons join their labor or property for a business undertaking and share profits.
Judgement Rate: A rate that is applied solely to individual insureds by the insurance company.
Lapse: The termination of an insurance policy due to the failure to pay the premium.
Leasehold Interest: Property insurance covering the loss suffered by a tenant due
to termination of a lease because of damage to the leased premises by a covered loss.
Lessee: The person to whom a lease is granted Lesser: The person granting the
Liability: The legal obligation to pay a monetary award for injury or damage
caused by one's negligent or statutorily prohibited action.
Liberalization Clause: A provision within an insurance policy that broadens the coverage if the insurance
company offers a broader coverage form within the first 45 days of coverage.
Lien: An obligation that can be held by an individual who has an interest in a particular
matter or property.
Limit of Liability: The most an insurance company agrees to pay
in the case of loss.
Longshore and Harbor Workers' Compensation Act: A federal law
that provides workers' compensation benefits to employees of a vessel injured in
maritime employment - usually in loading, unloading, repairing or building a vessel
- but not applicable to crew members.
Loss: The amount an insurance company pays
for damages under the terms of a policy.
Loss Adjustment Expense: The cost assessed
to a particular claim for investigating and adjusting that claim.
Loss Constant: A flat charge added to the premium of small workers' compensation policies to off
set higher loss ratios.
Loss Control: A technique that is put in place to reduce
the possibility that a loss will occur or reduce the severity of those that do occur.
Loss Payable Clause: An insurance clause that authorizes loss payments to a person
or entity having an insurable interest in the covered property.
Loss Ratio: Percentage of losses incurred against earned premiums.
Loss Report: A form showing reported
claims which provides information such as the date of occurrence, type of claim,
amount paid and amount reserved for each loss Loss Reserve: An estimated amount
set aside for a particular claim that has not yet been paid.
Lost Policy Release: A signed statement by the named when the insured wishes to cancel the policy, but
has lost or mislaid the policy, which releases the insurance company from all liability or losses.
Medical Payments, Auto: Coverage, which is optional, under an auto policy
to pay for medical expenses for bodily injury caused by an auto accident, regardless
of fault. Coverage for persons other than the named insured and his or her family
members is typically restricted to circumstances when they are occupants of the
Medical Payments, General Liability: A general liability coverage that
reimburses others, regardless of fault, for medical or funeral expenses incurred
as a result of bodily injury or death sustained by an accident Mexico Coverage:
Coverage which is sometimes provided under automobile policies for the operation
of an insured motor vehicle within Mexico, usually limited to a stated number of
miles from the U.S. border.
Minimum Premium: The lowest amount of premium to be charged
for providing particular insurance coverage.
Misrepresentation: A false or misleading
statement, either directly or indirectly that, if intentional and material, can
allow the insurer to void the insurance contract.
Mobile Equipment: Equipment such as earth movers, tractors, diggers, farm machinery, forklifts, etc., that even when
self-propelled, are not considered as automobiles for insurance purposes.
Monopolistic State Funds: States or Jurisdictions where an employer must obtain workers’ compensation
insurance from a state fund or qualify as a self-insurer, as is allowed in five
of the states: North Dakota, Ohio, Washington, West Virginia, Wyoming, Puerto Rico
and the U.S. Virgin Islands.
Mortgage Clause: Property insurance provisions granting
protection for the mortgagee named in the policy. It establishes that loss to mortgaged
property is payable to the insured and to the mortgage named in the policy.
Named Perils Coverage: A property insurance term referring to exact causes of loss
specifically listed as covered.
National Flood Insurance Program: A federally funded
program established to make flood insurance available to properties located in participating
Nonadmitted Insurer: An insurance company that is not licensed to do
business in a specific state. The insurers may write coverage through an excess
and surplus lines broker that is licensed in these jurisdictions.
Nonowned Automobile: In commercial auto policies, coverage for autos that are used in connection with
the named insured’s business but are neither owned, leased, hired, rented, or borrowed
by the named insured. The term specifically applies to vehicles owned by employees
and used for company business.
Nonsubscription: A Workers Compensation term used
in Texas that refers to employers who choose to be out of the Workers Compensation
system. Firms that are proven negligent in causing a worker’s injury, can be held
liable in tort, since nonsubscribing employers waive the traditional common law
defenses available to employers subject to Workers Compensation laws.
Occupational Disease: A conditon or disorder that is caused by exposure to environmental
factors associated with employment, including acute and chronic illnesses or diseases
that may be caused by inhalation, absorption, ingestion or direct contact.
Occupational Injury: An injury arising in the course and scope of employment that is caused by
factors associated with the work undertaken.
Occurrence: A continual, gradual or
repeated exposure to substantially the same general harmful conditions. General
liability policies insure liability for bodily injury or property damage that is
caused by an occurrence.
Package Policy: A policy providing several different coverages combined into one
policy. Refers to a policy providing both general liability insurance and property
Payroll Limitation: A limit on the amount of payroll for certain classifications
used for the development of premium.
Peril: Cause of loss such as fire, windstorm, collision etc.
Personal Auto Policy (PAP): A policy insuring private-passenger autos
owned by individuals.
Personal Injury: A General Liability coverage for insurable
offenses that cause harm, other than bodily injury, such as false arrest, detention
or imprisonment, malicious prosecution, wrongful eviction, slander, libel and invasion
Personal Injury Protection (PIP): An automobile insurance coverage mandated
by law in some states. The statutes typically require insurers to provide or offer
to provide first-party benefits for medical expenses, loss of income, funeral expenses
and similar expenses without regard to fault.
Personal Property: All tangible property not classified as real property such as contents.
Policy Fee: A one-time charge per
policy that does not change with the size of the premium.
Policy Period: The term
or duration of a policy including the effective and expiration dates Pollutant:
An irritant or contaminant, whether in solid, liquid, or gaseous form, including
smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste Premises: The location
where coverage applies.
Premises-Operations: A category of hazard ordinarily insured
by a general liability policy which is composed of those exposures to loss that
fall outside the defined 'products-completed operations hazard,' including liability
for injury or damage arising out of the insured's premises or out of the insured's
business operations while such operations are in progress Premium: The amount of
money an insurance company charges to provide coverage in a policy.
Pro Rata Cancellation: The cancellation of an insurance policy with the return premium being the full proportion
of premium for the unexpired term of the policy, without penalty for early cancellation.
Product: Items manufactured, sold, handled, distributed or disposed of by the named
insured or others involved with the named insured in the course of their business.
Includes containers, parts and equipment, product warranties and provision of or
failure to provide instructions and warnings.
Product Liability: The liability for
bodily injury or property damage a merchant or manufacturer may incur as a consequence
of some defect in the product sold or manufactured Products-Completed Operations:
General Liability coverage for liability arising out of the insured’s products or
business operations conducted away from the insured's premises once those operations
have been completed.
Professional Liability: Coverage designed to protect professionals
such as physicians and real estate brokers, against liability incurred as a result
of errors and omissions in performing professional services.
Property Damage: In the general liability policy, a physical injury to property, resulting in the loss
Property Insurance: First-party insurance for real and personal property
against physical loss or damage.
Real Property: Real estate including buildings and vegetation.
Renewal Policy: A policy issued to replace an expiring policy.
Rents or Rental Value Insurance: Insurance
that reimburses a building owner for loss of rental income due to damage by an insured
Replacement Cost Coverage Endorsement: A property insurance provision that
changes the valuation of covered property to replacement cost with no deduction
Return Premium: The amount of premium due to the insured should
the actual cost of a policy be less than the insured previously paid.
Robbery: Theft of property while force is used or threatened.
Short-Term Cancellation: Cancellation of an insurance policy prior to the expiration
date in which a penalty in the form of a less than full prorate premium refund is
Special Causes of Loss Form: A cause of loss form providing coverage from
all causes of loss unless specifically excluded or limited.
Specified Causes of Loss Coverage: Auto physical damage coverage only for losses caused by the perils listed
in the policy.
Sprinkler Leakage Coverage: Coverage for property damage caused by
the accidental discharge or leakage of water from automatic sprinkler systems or
other fire prevention devices.
Surplus Lines Insurance: Insurance written by insurers
not licensed in the states where the risks are located and placed with such insurers
under the surplus line laws of the various states. Before such placements can be
made through specially licensed surplus line agents and brokers, state laws generally
require evidence reported before some predetermined future date ('sunset').
Time Element Insurance: A term referring to property coverage for loss of earnings
or income resulting from the inability to put damaged property to its normal use.
Transit Coverage: Coverage on the insured's property while in transit from one location to another, over land.
Umbrella Liability Policy: A policy designed to provide additional protection against
catastrophic losses covered under liability policies, such as the business auto
policy, commercial general liability policy, watercraft and aircraft liability policies
and employers liability coverage. It provides excess limits when the limits of the
underlying liability policies are used up by the payment of claims and it drops
down and picks up where the underlying policy leaves off when the aggregate limit
of the underlying policy in question is exhausted by the payment of claims. It also
provides protection against some claims not covered by the underlying policies,
subject to a self-insured retention.
Underinsured Motorists Coverage: Provides coverage
for bodily injury, and in some states property damage, for losses incurred by an
insured when an accident is caused by a motorist who does not have sufficient insurance
Underlying Coverage: The insurance or coverage in place on the same risk
that will respond to loss before the excess policy is called on to pay any portion
of the claim.
Unearned Premium: That portion of the policy premium that represents
the unexpired policy term.
Uninsured Motorist coverage: Provides coverage for bodily
injury, and in some states property damage, for losses incurred by an insured when
an accident is caused by a motorist who is not insured.
Utility Service Interruption Coverage: Coverage for the loss to an insured due to lack of incoming electricity
which was caused by damage from a covered cause of loss, such as a fire or windstorm,
to property away from the insured's premises - usually the utility generating station.
Also referred to as 'off-premises power coverage'.
Vacancy Provision: Property insurance provision found in commercial property policies
that restrict coverage in connection with buildings that have been vacant for a
specified number of days, usually 60 days.
Valuable Papers and Records Coverage: Coverage that pays the cost to reconstruct damaged or destroyed valuable papers
and records and usually includes almost all forms of printed documents or records
except money or securities; data processing programs, data and media are usually
Waiver of subrogation: Also known as 'transfer of rights of recovery,'
the relinquishment by an insurer of the right to collect from another party for
damages paid on behalf of the insured.