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
Agent: An authorized representative of an insurance company.
All Risk Coverage: Property insurance covering loss arising from all causes of loss except those that are specifically excluded.
Application: A form with 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”
Backdating: Making the effective date of a policy earlier than the date of application. Backdating is often used to make the age of the applicant lower than it actually was atthe time of application so that he/she can get a lower premium. State laws often setlimits to this.
Basic Cause of Loss Form: Property coverage for named perils: Fire,
Lightening, Explosion, Smoke, Windstorm, Hail, Riot, Civil Commotion, Aircraft,
Sprinkler Leakage, Sinkhold 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 companies
Binder: A temporary insurance policy that expires at the end of a specific time period or when a permanent policy is written. A binder is given to an applicant for insurance during the time it takes the an insurance company to complete the policy paperwork.
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 performanceor honesty of a second party, the principal (obligor), to the third party (obligee) to whom the performance or debt is owed
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 leakagefrom 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
Business Auto Policy: Auto Policy for businesses that includes auto liability and auto physical damage coverages
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 loss
Business Interruption Coverage: See Business Income Coverage
Business Owners Policy (BOP): A policy that combines property and liability coverages for special types of small businesses
Cancellation: The termination of an insurance policy usually before its expiration
Care, Custody or Control: An exclusion of liability insurance which eliminates coverage for damage to property in the insured’s care, custody or control
Carrier: The insurance company which provides coverage
Casualty Insurance: Insurance that covers loss caused by injuries to persons and the legal liability imposed on the insured for injury or for damage to property of others
Catastrophe: A severe loss causing sizable financial loss
Causes of Loss Forms: The commercial property forms that define the covered
causes of loss for which coverage is provided. Commonly, there are 3 Cause of
Basic, Broad and Special
Certificate of Insurance: A document providing evidence that insurance has been purchased
Claim: A request by a policyholder or a claimant for payment under a policy of insurance
Claim Expense: Expenses of settling or investigating a claim
Claimant: The person presenting a claim
Claims Reserve: An amount of money set aside to meet claims reported but not paid
Class: A group of businesses who have common or similar exposures and are grouped together for rating purposes
Classification: The arranging or establishing of business groups or categories for rating purposes
Coinsurance Provision: An insurance provision for property coverages in which the policyholder must carry an amount of insurance that is at least equal to a set percentage of the value of the property in order to receive full payment of a loss
Collapse: Collapse of a building and collapse of personal property within a building due to specified causes (such as weight of snow, ice or rain). Does not include collapse dueto design error or due to faulty workmanship or materials if the collapse occurs after construction is complete
Collision Insurance: Provides for payment to a covered automobile resulting from the striking of another object by a moving vehicle
Commercial General Liability Policy (CGL): A coverage which protects business organizations against liability claims for bodily injury and property damage. Those claims may be the result of events at your place of business, from your business operations, the products or services you make or do, communications or advertisements your business broadcasts
Completed Operations: A General Liability coverage for the work of the insured thathas been completed away from the business premises
Comprehensive Auto Coverage: Covers an automobile for loss or damage for all causes except for those specifically excluded
Concealment: Failure to disclose facts which may void an insurance policy
Conditions: Things agreed upon in an insurance policy that state the rights and the requirements of the insured and the insurer
Contract: An agreement between two or more parties with characteristics of mutual assent, competent parties, a valid consideration and legal subject
Coverage: Coverage is just another term for Insurance. It can be used to mean either the dollar amounts of insurance purchased ($500,000 of liability coverage), or the type of loss covered (coverage for theft).
Countersignature: The signature of a licensed agent or representative on a policy thatis required to validate the policy
Debris Removal: The cost of removal of debris from covered property damaged by an insured peril
Deductible: The amount of loss which is paid or absorbed by the insured prior to determining the insurance company’s liability
Deposit Premium: The amount of premium required at the beginning of a policy prior to the actual premium being determined
Depreciation: The reduction in value of property over a period of time. Usually as a result of age, wear and tear, or economic obsolescence
Direct Damage: Causes of loss that produce direct and straightforward propertydamage (without interruption in time or deviation in space) from the cause of the event to the damaged property
Driver Other Car Endorsement: An endorsement that can be added to an automobile policy that gives protection while the insured designated in the endorsement is driving a car other than the one named in the policy
Drop Down Provision: A clause used in Umbrella policies providing that the Umbrella will ‘drop-down’ over underlying policy aggregate limits when they have been reduced or exhausted
Earned Premium: The amount of premium that has been used for certain periods of time
Earth Movement or Earthquake Exclusion: An exclusion found in most property insurance policies eliminating coverage for earth movement or earthquake, except ensuing fire
Effective Date: The date on which an insurance binder or policy goes into effect
Employee Dishonesty Coverage: Coverage for theft of money, securities or propertyby an employee
Employers Liability Coverage: Part 2 of the Workers’ Compensation policy which pays on behalf of the employer all sums that the employer becomes legally obligated to pay because of bodily injury by accident or disease sustained by any employee of theinsured arising out of and in the course of his employment by the insured
Employment Practices Liability Insurance: A form of liability insurance covering wrongful acts arising from employment practices such as wrongful termination, discrimination and sexual harassment
Endorsement: A document attached to an insurance policy that changes the original policy provisions
Equipment Floater: A property insurance coverage for equipment that is often moved from place to place
Excess and Surplus Lines Insurance: Coverage that is provided by insurers not licensed in the states where the risk is located
Exclusions: Specified hazards listed in a policy for which benefits will not be paid.
Expense Constant: A small flat expense charged to Workers’ Compensation policies
Experience Modifier: A debit or credit factor developed by measuring the
difference between the insured’s actual past experience and the expected or
actual experience of
the class of business
Expiration: The ending date of an insurance policy
Exposure Base: The basis of rates that are applied to determine premium. Some exposures may be measured by payroll, receipts, sales, square footage, area, man- hours or per unit
Extra Expense Coverage: Coverage for reimbursement of expenses in excess of normal operating expenses that are incurred to continue operations after a direct damage loss
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
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
Firewall: A computer that protects a company’s private network from outside internet users
Fixed Benefit: A death benefit, the dollar amount of which does not vary.
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 coverages 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
Garagekeepers Coverage: Provides coverage to owners of storage garages, parking lots and body and repair shops for their liability of damage to automobiles left in their custody for safekeeping or repair
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
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 autos 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
Improvements 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 toinsurance 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
Insurability: The condition of the individual wishing to be insured, including their health, susceptibility to injury and life expectancy.
Insurance: A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to pay for the loss in the amount specified in the contract.
Policy: The printed form which serves as the contract between an insurerand an insured.
Insurance to Value: Insurance written in an amount equal to the value of the property or which meets coinsurance requirements
Insured: The party who is being insured. In life insurance, it is the person because of his or her death the insurance company would pay out a death benefit to a designated beneficiary.
Insurer: The insurance company; Party that provides insurance coverage, typically through a contract of insurance.
Lapse: Termination of a policy due to the policy owner’s failure to pay the premium within the grace period.
Lessee: The person to whom a lease is granted
Lessor: The person granting the lease
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
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 offset 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
Medical Expenses: Reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral expenses. What is considered reasonable is outlined in a policy.
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 insured auto
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
Minimum Premium: The lowest amount of premium to be charged for providing a particular insurance coverage
Misrepresentation: The act of knowingly presenting false information.
Mobile Equipment: Equipment such as earthmovers, tractors, diggers, farm machinery, forklifts, etc., that even when self-propelled, are not considered as automobiles for insurance purposes
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 mortgagee 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 communities National Flood Insurance Program: A federally funded program established to make flood insurance available to properties located in participating communities
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
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 insurance
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 of privacy
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: The printed document given to the insured, outlining the terms and conditions of the Insurance coverage.
Policy Fee: A one-time charge per policy that does not change with the size of the premium
Policy Holder: The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.
Policy Period: The term or duration of a policy including the effective and expiration dates
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 agreed upon, payment made to keep an insurance policy in force, usually a monthly payment.
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 of use
Property Insurance: First-party insurance for real and personal property against physical loss or damage
Real Property: Real estate including buildings and vegetation
Reinstatement: Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.
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 peril
Replacement: A new policy written to take the place of one currently in force.
Representation: Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief but that are not warranted as exact in every detail.
Return Premium: The amount of premium due the insured should the actual cost of a policy be less than the insured previously paid
Risk: The chance of injury, damage, or loss.
Robbery: Theft of property while force is used or threatened
Short-Term Cancellation: Cancellation of an insurance policy prior to the expirationdate in which a penalty in the form of a less than full pro-rata premium refund is allowed
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 limits
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
Underwriter: Company receiving premiums and accepting responsibility for
fulfilling the policy contract. Also, company employee who decides whether the
assume a particular risk; or the agent who sells the policy
Uninsurable Risk: A person who is not acceptable for insurance due to excessive risk.
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 excluded
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
Workers’ Compensation: Protection which provides benefits to employees for injury or contracted disease arising out of and in the course of employment. Most states have laws which require such protection for workers and prescribe the length and amount of such benefits provided