Glossary

 

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    • Abandonment Clause: The clause in most policies that says you can’t simply walk away from damaged property and expect your insurance company to take over. This clause makes it clear: you’re still responsible for the property, even if it’s damaged.
    • Absolute Liability: Sometimes, responsibility doesn’t depend on proving fault. Absolute liability means you can be held legally responsible for damages even if negligence can’t be shown.
    • Accident: A sudden, unexpected event that wasn’t planned and wasn’t intentional.
    • Actual Cash Value (ACV): What it would cost to replace something at the time of loss, minus depreciation for age and wear.
    • Actuary: A professional in the insurance business, usually working for the insurance company, who specializes in crunching the numbers to predict risks, costs, and funding needs of insurance claims.
    • Additional Insured: An individual or entity that is not included as an insured under the insurance policy of another, but may be added to provide a certain degree of insurance protection.
    • Adjuster: A professional who investigates and settles losses on behalf of an insurance company, or may be hired independently to resolve any issues between the insurance company adjuster and the insured
    • Agent: An insurance company representative licensed by the state who solicits, markets, negotiates, binds, and administers contracts of insurance while providing a valuable service to a policyholder for the insurer.
    • All-Risk (Open-Perils) Policies: Coverage that covers all losses except those losses specifically excluded in your policy.
    • Amendment: A formal document revising the provisions of an insurance policy. Usually, signed jointly by an insurance company officer and the policy owner or his authorized representative.
    • Application: A signed statement of facts made by a person applying for insurance. The application is used by the insurance company to determine whether to issue a policy. The application becomes part of the insurance contract when the policy is issued.
    • Arson: Deliberately setting fire—also a criminal act often tied to fraud.
    • Attractive Nuisance: A Condition that can attract and injure someone (usually children), such as an unfenced pool or trampoline.
    • Automobile Liability Insurance: Protection for an insured against financial loss because of legal liability arising from an auto accident, such as injuries to others or damage to their property.
    • Automobile Physical Damage Insurance: Pays to repair or replace your vehicle for covered perils (like collision or comprehensive losses).
    • Bailee: A person or business temporarily holding someone else’s property (e.g., a repair shop).
    • Beneficiary: The designation by the owner of a life insurance policy that indicates who will receive the proceeds upon the insured's death or when a policy endowment matures.
    • Binder: Temporary proof of coverage—oral or written—until the full policy arrives. (Ask for written confirmation.)
    • Bond: A three party contract that guaranteeing that if the principal fails to perform as obligated to, the obligee (person whom duty would be owed), will be financially protected by the issuer of the bond.
    • Broker: Represents you, the insured, in shopping and servicing coverage.
    • Broker of Record: Also known as Agent of Record, this is a broker designated to handle specific insurance contracts for the named insured.
    • Burglary and Theft Insurance: Coverage against property losses due to burglary, robbery, or larceny.
    • Business Income Insurance: Provides protection for a business owner against losses resulting from a temporary shutdown of the insured caused by a covered peril. This provides reimbursement for lost profits and necessary continuing expenses.
    • Business Insurance: A commercial insurance policy that provides coverage to a business. Many forms of business insurance are available, depending on your specific needs.
    • Builders Risk: A contract that will insure building contractors for damage to property under construction. Once erected, the Builders Risk policy may usually be converted to a specific type of homeowners or commercial property form.
    • Business Personal Property: Known as "contents," this refers to furniture, fixtures, equipment, machinery, merchandise, and all other personal property owned by the insured and used in the insured's business.
    • Cancellation: When an insurance policy is terminated before its normal expiration date, either by you or the insurer.
    • Cancellation Clause: The section of a policy that explains how cancellation works and when it’s allowed.
    • Capacity: The maximum amount of risk an insurer (or reinsurer) is willing to take on.
    • Captive Agent: An insurance agent who sells policies for just one company.
    • Cargo Insurance: An insurance policy protecting cargo (goods) being transported by a carrier.
    • Catastrophe: A large-scale disaster, like a hurricane or tornado, that causes widespread losses.
    • Causes of Loss Form: Part of a commercial property policy that lists the perils (covered risks), exclusions, and extra coverages. (Always worth reviewing!)
    • Certificate of Insurance: A document proving you have coverage, often requested by landlords, clients, or business partners.
    • Claim: A formal request asking your insurer to pay for a covered loss.
    • Claims Made Policy: A liability policy that responds to claims made during the policy term—even if the event happened earlier (as long as it’s after the retroactive date).
    • Clause: In an insurance policy, sentences and paragraphs describing coverage, exclusions, duties of an insured, termination of coverage, and other such parts of the insurance policy.
    • Coinsurance: In property insurance, a clause that states the insured will share in losses to the extent that he is underinsured at the time of loss. Also, called a co-insurance penalty.
    • Collision Insurance: A form of automobile insurance that provides protection against loss resulting from any damage to the policyowner's car caused by collision with another vehicle or object, whether it was the insured's fault or not.
    • Commercial General Liability Policy (CGL): Provides separate limits of general liability, fire legal liability, medical payments, products and completed operations, and advertising and personal liability.
    • Commercial Lines: Insurance for businesses, professionals, and commercial establishments.
    • Commercial Package Policy (CPP): A commercial insurance policy that is designed to meet the specific insurance needs of businesses.
    • Completed Operations Insurance: A type of insurance that covers a contractor's liability for accidents arising out of jobs or operations that were completed by the contractor.
    • Comprehensive Personal Liability Insurance: Provides individuals and family members with protection from legal liability for most accidents caused by them in their personal lives. Note that any legal liability claims submitted while in the course of business activities are not covered.
    • Compulsory Insurance: Any form of insurance that is required by law.
    • Concealment: Failure of an applicant for insurance to reveal a material fact to the insurance company.
    • Conditional Binding Receipt: A receipt given for premium payments accompanying an application for insurance.
    • Conditions: Provisions stated in an insurance contract that state the rights and duties of the insured, or the rights and duties of the insurer. Typical duties include the insured's responsibilities after a loss, cancellation provisions, and the insurance company's right to inspect damaged property.
    • Condominium Unit Owners Coverage Form: A commercial property form designed to cover the needs of commercial condominium unit owners.
    • Consideration: One of the key elements that comprise an insurance contract, consideration refers to the offer made by the insurance company to the insured for payment of the premium, as well as the statements made by the prospective policyholder on their application.
    • Consequential Loss: A financial loss occurring as the result of some other loss. Also known as an indirect loss.
    • Construction Bond: This bond will protect the owner of a building or other structure should the contractor be unable to fulfill their contractual duty to the insured. In such a case, the insurer is obligated to see that the work is completed.
    • Contingent Beneficiary: A person designated to receive policy benefits if the primary beneficiary is deceased at the time benefits are payable.
    • Contingent Liability: Any liability arising out of work done by independent contractors for a firm. The firm could be liable for the work done by an independent contractor if the activity is illegal, the situation did not permit delegation of authority, or the work is inherently dangerous.
    • Contract: An agreement between the insurer and the insurance company that provides a legally enforceable obligation to provide benefit payments for all premium amounts received. Contract Bond: A bond used to guarantee the performance of a construction contract and the payment of all materials and labor bills.
    • Contractual Liability Insurance: Provides protection to the insured in the event a loss occurs for which liability is assumed, express or implied, under a written contract.
    • Contributory Negligence: A "law" of principle that states a person may have contributed to their own injury.
    • Declarations: Information such as name, description, and location of insured property, premiums payable, and coverage amounts is placed on what agents call the Declarations Page.
    • Declination: The insurer's rejection of an insurance application.
    • Deductible: The amount which a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss.
    • Depreciation: The decrease in value of property over a period of time due to wear and tear or obsolescence.
    • Direct Loss: Any financial loss that results directly from an insured peril.
    • Direct Writer: An insurance industry term for which an insurance company uses its own sales employees to write insurance policies.
    • Directors' and Officers' Liability Insurance: The protection of corporate directors and officers from liability arising out of errors in judgment, duty breaches, and any wrongful acts related to their organizations.
    • Disappearing Deductible: A deductible in an insurance contract that provides for a decreasing deductible amount as the size of the loss increases.
    • Driver Education Credit: A student discount or reduction in premium amount for which younger drivers become eligible on completion of a driver education course. These courses are available in most public school systems.
    • Dwelling Forms: An insurance policy designed to cover a dwelling and the personal property that is in it, plus some additional coverage. There are several forms available; check with us for your dwelling insurance needs.
    • Earned Premium: An amount of "used up" policy premium during the term of an insurance policy.
    • Economic Loss: An estimated total cost, insured and uninsured, of mishaps (such as vehicle accidents, work accidents, and fires), including such factors as property damage, funeral expenses, wage loss, insurance administration costs, and medical, hospital, and legal costs.
    • Effective Date: The date on which the insurance under a policy will begin.
    • Employee Dishonesty Coverage Form: A commercial crime insurance form that covers the loss of money, securities, and other covered property because of a dishonest act of a covered employee.
    • Endorsements: An additional piece of paper, not a part of the original insurance policy, in which certain terms and conditions, when attached to the original insurance policy, become a legal part of that contract.
    • Errors and Omissions Insurance: A liability insurance policy that provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the insured.
    • Estoppel: Legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when such representation has been relied on by the one to whom the statement was made.
    • Evidence of Insurability:Any statement of proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance.
    • Excess and Surplus Insurance:(1) Insurance to cover losses above a certain amount, with losses below that amount usually covered by a regular policy. (2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician's hands or the multiple perils of a convention, for which coverage is unavailable in the normal market.
    • Exclusions: The specific conditions or circumstances listed in the policy for which the policy will not provide benefit payments.
    • Expense Ratio: The ratio of operating expenses to premiums.
    • Experience Modification Factor: Used in workers' compensation rating to reflect the degree to which a particular employer has experience that is better or worse than expected for that industry.
    • Experience Rating: Process of determining the premium rate for a group risk, wholly or partially on the basis of that group's experience.
    • Extra Expense Insurance: A Type of business income insurance that provides reimbursement to an insured for the extra expense incurred to continue a business operation when property has been damaged or destroyed by a covered peril
    • Fair Rental Value: An amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable.
    • Farmowners-Ranchowners Policy: A package policy for a farm or a ranch, providing property and liability coverage.
    • Financial Responsibility Law: A state law that may require motorists to furnish evidence, either before or after involvement in an auto accident, of their ability to pay for damages up to certain minimum dollar limits.
    • Fire: Combustion accompanied by a flame or glow, which escapes normal confines to cause damage.
    • Floater: An insurance policy that covers property that can be moved from one location to another for both transportation perils and perils affecting property at a fixed location.
    • Flood Insurance: Coverage against loss resulting from rising water.
    • Garage Liability Insurance: A Type of insurance that protects garage owners or automobile dealers for liabilities they may have in their business operations.
    • General Liability Insurance: The insurance coverage that pertains to claims arising out of the insured's liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services.
    • Good Student Discount: The reduction of an automobile premium for a young driver who ranks in the upper percent of their class.
    • Grace Period: The specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues.
    • Gross Negligence: Intentional failure to perform a duty, reckless disregard of the consequences as affecting the life or property of another
    • Gross Premium: Insurance premium paid by the policyholder.
    • Hail Insurance: A form of insurance that protects against loss of crops from hail.
    • Hazard: A condition that creates or increases the chance of loss.
    • Hold-Harmless Clause: A clause written into an insurance policy that one party agrees to release another party from any legal liability.
    • Homeowners Policy: A package policy providing homeowners with a broad range of property and liability coverage.
    • Hull Insurance: A class of ocean marine insurance that covers physical damage to the ship or vessel insured. Usually, written on an "all-risks" basis. Also can provide physical damage insurance on an aircraft, similar to collision insurance in an automobile policy.
    • Hurricane: A tropical storm marked by extremely low pressure and circular winds with a velocity of 75 miles an hour or more.
    • Indemnification: The compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
    • Independent Agent: An independent agent is a businessperson who represents two or more insurance companies in a sales and service capacity and is paid on a commission basis.
    • Inflation-Guard Endorsement: Endorsement added to a homeowner's policy to increase (periodically) the face amount of insurance of the dwelling and other policy coverage by a specified percentage.
    • Inland Marine Insurance: A broad form of insurance, generally covering articles in transit as well as bridges, tunnels, and other means of transportation and communication. Also covering goods in transit, excluding ocean voyages, it includes numerous "floater" policies, such as personal effects, personal property, jewelry, furs, fine arts, and other items.
    • Innkeepers' Legal Liability: A coverage for motel and hotel operators, protecting them from the legal liability they have for the property of guests.
    • Insolvent: Not having sufficient financial resources to meet financial obligations.
    • Insurability: The acceptance by the insurer of an applicant for insurance.
    • Insurable Risk: The conditions that make a risk insurable are: (1) It must be accidental, (2) The loss must be defined, (3) The peril insured against must produce a definite loss and hardship not under the control of the insured, (4) There must be a large number of exposures subject to the same perils, (5) The loss must be calculable and the cost of insuring must be economically feasible, (6) The peril must be unlikely to affect all insureds simultaneously, and (7) The loss produced by a risk must be definite and have a potential to be financially serious.
    • Insurance: A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (called a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions in a contract.
    • Insurance Company: An organization chartered to operate as an insurer.
    • Insurance Commissioner: The top insurance regulatory official in a state.
    • Insured: A person or organization, covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy.
    • Insurer: The party to the insurance contract who promises to pay losses or benefits, or any corporation engaged primarily in the business of furnishing insurance to the public.
    • Insuring Agreement: The part of an insurance contract stating the promises of the insurer.
    • Insuring Clause: A clause that sets forth the type of loss being covered by the insurance policy and the parties to the insurance contract.
    • Jewelers' Block Insurance: An all-risk insurance contract that provides jewelers with coverage for losses that they would be exposed to.
    • Key-Person Insurance: Insurance designed to protect a business firm against the loss of income resulting from the death or disability of a key employee
    • Lapse: The termination of an insurance policy due to non-payment of premium(s).
    • Lapsed Policy: A policy terminated for non-payment of premiums.
    • Larceny: The unlawful taking of personal property of another.
    • Law of Large Numbers: A concept that the greater the number of exposures, the more closely actual results approach the probable results expected from a number of exposures.
    • Legal Reserve: The minimum reserve that an insurance company must keep to meet future claims and obligations, as calculated under its state insurance code.
    • Liability: Any legally enforceable act or obligation.
    • Liability Insurance: Insurance covering the legal liability of the insured resulting from injuries to a third party to their body or damage to their property.
    • Liability Limits: The maximum sums listed on a liability policy that an insurance company provides protection.
    • License and Permit Bond: A type of surety bond guaranteeing that a person bonded will comply with all laws and regulations that govern their activities.
    • Life Insurance: Insurance providing payment of a specified amount on the insured's death, either to his or her estate or to a designated beneficiary.
    • Liquor Liability Insurance: Provides protection for the owners of an establishment that sells alcoholic beverages against liability arising out of accidents caused by intoxicated customers.
    • Loss: The reduction in the value of an insured's property caused by a covered peril.
    • Loss Control: Any actions intended to reduce the frequency or severity of losses.
    • Loss Payable Clause: A means of protecting a mortgagee's interest in property by directing the insurer to make a loss payment to the mortgagee in the event of a loss.
    • Loss Prevention: A measure that reduces the probability of a particular loss but does not eliminate completely all possibility of that loss
    • Loss Ratio: The ratio of claims to premiums.
    • Loss Reserve: An amount set up as the estimated cost of a claim.
    • Medical Payments Insurance: A coverage, available in various automobile and liability insurance policies, in which the insurer agrees to reimburse the insured and others, without regard for liability.
    • Misrepresentation: A false, incorrect, or incomplete statement of a material fact, made in the application for a policy.
    • Mode of Premium Payment: The frequency at which premiums are paid, monthly, quarterly, semiannually, or annually.
    • Named Perils: Coverages in a property policy that provide protection from loss of perils specifically listed in the insurance policy. Examples of named perils include fire, windstorm, theft, and smoke.
    • Negligence: The failure to use the reasonable care that a prudent person would have used under the same or similar circumstances.
    • Noncontributory: A term applied to employee benefit plans or insurance, in which the employer pays the full cost of the premium for all of the employees.
    • Nonowned Auto: Any automobiles not owned, leased, hired, or borrowed which are used within the scope of business. Nonparticipating: Insurance under which the policyholder is not entitled to share in the dividend distribution of the company.
    • Nonrenewal: The termination of insurance coverage at an expiration date or anniversary date.
    • Notice of Cancellation: Written notice by an insurance company of its intent to cancel the policy.
    • Obligee: Anyone in whose favor an obligation runs. This term is used with surety bond,s referring to a person, firm, or corporation protected by the bond.
    • Occurrence: An event that results in a loss that is insured.
    • Occurrence Coverage: A liability insurance policy that covers claims arising out of occurrences that take place during the policy period.
    • Package Policy: Any combination of two or more lines of coverage into a single policy.
    • Peril: The cause of a loss insured against in a policy.
    • Permit Bond: A bond that guarantees a person who has been issued a permit will comply with any laws and ordinances under which the permit was issued.
    • Personal Articles Floater: A type of insurance designed to meet the needs for insurance on property of a movable nature. This coverage usually protects against all physical loss, subject to special exclusions and conditions. Examples of this type of property include jewelry, furs, silverware, fine arts, and valuable collector's pieces..
    • Personal Injury Protection (PIP): First-party no-fault coverage in which an insurer pays, within specified limits, the medical, hospital, loss of work income, and funeral expenses of the insured.
    • Personal Lines: Those types of insurance, such as individual automobile or home insuranc,e rather than for businesses or organizations.
    • Physical Damage: Damage to or loss of an automobile resulting from a named peril.
    • Policy: The legal document issued by the company to the policyholder, outlining the conditions and terms of the insurance; also referred to as the policy contract or the contract.
    • Policy Dividend: A refund of part of the premium on a participating insurance policy reflecting any difference between the premium charged and actual experience.
    • Policy Term: The period of time for which an insurance policy provides coverage.
    • Policyholder: The person who owns an insurance policy.
    • Pool: An organization of insurers or reinsurers through which particular types of risk are underwritten.
    • Premium: The sum paid by a policyholder to keep their insurance policy in force.
    • Premium Finance: Allows the insured to pay part of the premium when coverage takes effect and pay the rest during the policy period through arranged payments.
    • Primary Insurance: Insurance that pays compensation for a loss ahead (first) of any other insurance coverage the policyholder may have.
    • Probate Estate: That portion of the assets and liabilities whose distribution is supervised by the courts in the probate process.
    • Product Liability Insurance: Protection against financial loss arising out of the legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of a covered product.
    • Proof of Loss: Documentation presented to the insurance company by the insured in support of a claim so that the insurer can determine its liability under the policy.
    • Property Insurance: Insurance providing financial protection against the loss of, or damage to, real and personal property caused by a covered peril.
    • Provision: A clause, sentence, or paragraph of an insurance contract that describes or explains a feature, benefit, condition, or requirement of any insurance protection afforded by the contract.
    • Proximate Cause: The effective cause of loss or damage; an unbroken chain of events between the occurrence and damage.
    • Punitive Damages: A court awarded amount that exceeds the economic losses and general damages of a defendant and is intended solely to punish the plaintiff because of reckless or malicious acts.
    • Pure Risk: Uncertainty whether a loss will occur. Only pure risks are insurable.
    • Radius of Operation: Used to determine rates for automobiles owned by a business.
    • Rate: The pricing factor upon which an insurance premium is based.
    • Reasonable and Customary Charge: A charge, which is consistent with the going rate or charge in a certain geographical area, for identical or similar services.
    • Rebating: Giving any valuable consideration (commission) to a prospect or insured as an inducement to buy.
    • Reimbursement: Payment of the expenses actually incurred as a loss covered by the policy.
    • Reinstatement: The resumption of coverage under an insurance policy that has lapsed.
    • Renewal: A continuance of insurance under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.
    • Rental Insurance: A type of insurance that includes coverage similar to a homeowner's policy to cover the personal property of a renter or tenant in a building.
    • Replacement Cost: The cost to repair or replace property, excluding depreciation.
    • Representation: Statements made by an applicant in the application, which are represented as being true to the best of his knowledge and belief, but which are not warranted as exact in every detail.
    • Rescission: Termination of an insurance contract by the insurer on the grounds of a material misstatement on the application for insurance.
    • Reserve: The amount required to be carried as a liability in the financial statement of an insurer, a sum set aside by an insurance company as a liability to fulfill future obligations.
    • Rider: A document that amends an insurance policy or certificate. It may increase or decrease benefits, waive the condition of coverage, or amend the original contract in any other way.
    • Risk: The chance of loss. Also used to refer to the insured or to property covered by a policy.
    • Salvage: The recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.
    • Schedule: A list of individual items covered by an insurance policy with their descriptions and values.
    • Settlement Options: The several ways, other than immediate payment in cash, which a policyholder or beneficiary may choose to have policy benefits paid out.
    • Special Damages: Compensation awarded for actual economic losses, such as medical expenses and lost wages. (See general damages)
    • State Fund: A fund set up by a state government to provide a specific line or lines of insurance, such as Workers' Compensation..
    • State Insurance Department: A department of a state government whose duty is to regulate the business of insurance and give the public information on insurance.
    • Strict Liability: Usually dealing with property insurance, the liability that manufacturers and merchandisers may be subject to for defective products sold by them for damages, regardless of fault or negligence.
    • Subrogation: The process by which an insurance company seeks reimbursement from another company or person for a claim it has already paid.
    • Surety Bond: A bond guaranteeing that a principal will carry out the obligation for which they are bonded. Most often, this is issued to a contractor.
    • Surplus Lines: A risk or a part of a risk for which there is no normal insurance market available, insurance written by a non-admitted insurance company.
    • Tenants' Improvements and Betterments: The property affixed to an owner's building by the lessee or tenant, which may not be legally removed when the tenant leaves.
    • Term: A period of time a policy or bond is issued.
    • Term Insurance: Life insurance payable to a beneficiary only when an insured dies within a specified period (5, 10, 15, or 20 years). This is the quickest way to "build" an estate.
    • Third Party Insurance: The claimant under a liability policy. This person making the claim is not one of the other two parties, the insured and insurer.
    • Tort: A private wrong, other than a breach of contract, for which a court of law will afford legal relief.
    • Umbrella Liability Policy: Provides excess amounts of insurance above the primary policy as well as additional liability coverage.
    • Underwriter: A company employee who decides whether or not the company should assume a particular risk.
    • Underwriting: The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.
    • Unearned Premium: The portion of a premium that a company has collected but has yet to earn because the policy still has time to run.
    • Uninsured / Underinsured Motorist Coverage: A type of insurance that pays the policyholder and passengers in their automobile for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.
    • Valuable Papers and Records: An insurance coverage form that provides coverage for physical loss or damage to valuable papers and records.
    • Waiting Period: The length of time a person must wait from the date of application for coverage to the date the insurance is effective.
    • Waiver: An agreement attached to an insurance policy that exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.
    • Workers' Compensation Insurance: Insurance against liability imposed on certain employers to pay benefits and furnish care to employees who are injured, killed, or are sick due to occupational hazards.
    • Written Premiums: The total amount of premiums written in a year for all polices issued by an insurance company.