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>>GLOSSARY OF INSURANCE TERMS A B C D E F G H I J L M N O P R S T U V W A
Accident. An unplanned event, unexpected and undersigned, which occurs suddenly and at a definite place. See also Occurrence. Accident Frequency. The rate of the occurrence of accidents often expressed in terms of the number of accidents over a period of time. It is one method used for measuring the effectiveness of loss prevention services. Accident Severity. The measure of the severity or seriousness of losses, rather than the number of losses. It is measured in terms of time lost from work rather than the number of individual accidents. It is another way of measuring the effectiveness of loss prevention services. Act of God. An event arising out of natural causes with no human intervention which could not have been prevented by reasonable care of foresight. Examples are floods, lightning and earthquakes. Actual Cash Value. An amount equivalent to the replacement cost of lost or damaged property at the time of the loss, less depreciation. Additional Insured. A person other than the named insured who is protected under the terms of the contract. Usually, additional insured's are added by endorsement or referred to in the wording of the definition of "insured" in the policy itself. Additional Living Expense Insurance. A contract to reimburse the insured for increased living costs when loss of his property forces him to maintain temporary residence elsewhere. Adjuster. A representative of the insurer who seeks to determine the extent of the firm's liability for loss when a claim is submitted. Advertising Injury. Injury arising out of libel or slander, violation of the right to privacy, misappropriation of advertising ideas, or infringement of copyright, title or slogan committed in the course of advertising goods, products, or services. Agency . When one person acts on behalf of another person. Agent. One who solicits, negotiates or effects contracts of insurance on behalf of an insurer. Aggregate Limit. Usually refers to Liability Insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time. Aggregate Products Liability Limit. This limit represents the amount of money, which an insurer will pay during the term of a policy. Agreed Amount Clause. Under this clause, the insured and the insurer agree that the amount of insurance carried will automatically satisfy the coinsurance clause. Alien Insurer. An insurer formed under the laws of a country other than the United States. A U.S. company selling in other countries is also an alien insurer. All-Risks Insurance. The term is used to mean insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded. Appraisal. An evaluation of property made to ascertain either the appropriate amount of insurance to be written or the amount of loss to be paid. Appurtenant Structures. Buildings on the same premises as the main building under a Property Insurance Policy. Arbitration Clause. The provision in a Property Insurance contract which states that if the insurer and insured cannot agree on an appropriate claim settlement, each will appoint an appraiser and these will select a neutral umpire. Arson. The willful and deliberate burning of property. Automobile Insurance. A type of insurance which protects the insured against losses involving automobiles. Average Clause. A clause providing that similar items in one location or several locations which are insured by a policy shall be covered in the proportion that the value of each bears to the value of all. Avoidance of Risk. Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure. See Risk Management. A B C D E F G H I J L M N O P R S T U V W B
Bailees Customer Insurance. Insurance purchased by a bailee to protect the personal property of his customers against loss caused by specific perils. Bailees Liability Coverage. Coverage that meets the needs of a bailee's liability. His legal responsibility is to exercise care appropriate to the circumstances of the bailment. Binder. An agreement executed by an agent or insurer (usually the latter) putting insurance into force before the contract has been written or the premium paid. Blanket Crime Policy. A policy which provides coverage for employee dishonesty, loss of money and securities inside and outside the premises, depositor's forgery, loss of money orders, and counterfeit paper currency. Blanket Insurance. A form of Property Insurance that covers, in a single contract, either multiple types of property at a single location or one or more types of property at multiple locations. Boiler and Machinery Insurance. Insurance against the sudden and accidental breakdown of boilers, machinery, and electrical equipment. Coverage provided: damage to equipment, expediting expenses, property damage to the property of others, supplementary payments and automatic coverage is additional objects. Brick Construction. Refers to a building where at least 75% of the exterior walls are of some type of masonry construction, i.e., brick stone or hollow masonry tile, poured concrete or reinforced concrete, or hollow masonry block. Brick Veneer Construction. Refers to a building where the outside walls are constructed of wood with a facing of a single layer of brick. Broker of Record. A broker who has been designated to handle certain insurance contracts for the policy holder. Builder's Risk Coverage Form. A commercial property coverage form specifically designed for buildings in the course of construction. Burglary. Breaking and entering into the premises of another with felonious intent, leaving visible signs of forcible entry or exit. Business Auto Coverage Form. The latest commercial Automobile Insurance coverage form, which may be written as a monoline policy or as part of a commercial package. Business Income Coverage Form. A commercial property form providing coverage for "indirect losses" resulting from property damage, such as loss of business income and extra expenses incurred. Business Personal Property. Traditionally known as "contents," this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured's business. A B C D E F G H I J L M N O P R S T U V W C
Certificates of Insurance. A form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance in loan transactions and for other legal requirements. Claims-Made Coverage. A policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. Coinsurance Clause. A clause under which the insured shares in losses to the extent that he is underinsured at the time of loss. Collision Insurance. A form of Automobile Insurance that covers loss to the insured's own vehicle caused by its collision with another vehicle or object or its upset but not covering bodily injury or property damage liability arising out of the collision. Commercial General Liability (CGL) Coverage Part. General liability coverage which may be written as a monoline policy or part of a commercial package. Commercial Package Policy (CPP). A commercial lines policy that contains more than one of the following coverage parts: commercial property, Commercial General Liability, Commercial inland Marine, Commercial Crime, Boiler and Machinery insurance, Commercial Automobile Insurance and Farm coverage. Comprehensive General Liability. A policy covering a variety of general liability exposures, including Premises and Operations (OL&T or M&C), Completed Operations, Products Liability, and Owners and Contractors Protective. Concurrent Causation. A term referring to two or more perils acting concurrently (at the same time or in sequence) to cause a loss. Consequential Loss (or Damage). An indirect loss arising out of the policyholder's inability to use the property over a period of time, as opposed to a direct loss that happens almost instantaneously. Contingent Business Interruption Insurance. Coverage for the loss of earnings of an insured because of a loss to another business which is one of the insured's major suppliers or customers. Coverage. The scope of the protection provided under a contract of insurance. A B C D E F G H I J L M N O P R S T U V W D
Declination. Rejection of an application for insurance by the insurer. Deductible. The portion of an insured loss to be borne by the insured before he is entitled to recovery from the insurer. Demolition Clause. A provision that excludes liability for costs incurred in demolishing undamaged property, often necessitated by building ordinances requiring that structures must be demolished after a certain degree of damage has been sustained. Directors and Officers Liability Insurance. Insurance that protects directors, and officers from liability claims arising out of alleged errors in judgment, breaches of duty, and wrongful acts related to their organizational activities. Dram Shop Liability insurance. A form of insurance contract that protects the owners of an establishment in which alcoholic beverages are sold against liability arising out of accidents caused by intoxicated customers who have been served or sold the alcoholic beverages. Drive-Other-Car Endorsement. A coverage that may be added to an Automobile policy auto coverage to the individuals named in the endorsement while they are driving cars not owned by the individuals and not named in the policy. A B C D E F G H I J L M N O P R S T U V W E
Earth Movement. A peril including landslide, mudflow, earth sinking, rising or shifting, and earthquake. Earthquake Insurance. Insurance covering damage caused by an earthquake as defined in the contract. Effective Date. The date on which the protection of an insurance policy or bond goes into effect. Electronic Data Processing (EDP) Coverage. Specialized type of insurance designed to cover computer equipment, data systems, information storage media and expenses or income loss related to EDP losses. Employers Liability Coverage. This is coverage B of the standard Workers Compensation policy. It provides coverage against the common law liability of an employer for injuries to employees as distinguished from the liability imposed by a Workers Compensation law. Employers Nonownership Liability Insurance. Protects the employer for liability arising from the use by employees of their own cars on company business. Endorsement. A written or printed form attached to the policy which alters provisions of the contract. Endorsement Extending Period of Indemnity. An endorsement attached to Business Interruption policies which extends coverage to the period during which a business has reopened for business but have not reached the level of business activity which existed prior to the Business Interruption loss. Equipment Floater. A form which covers various types of equipment, e.g., construction equipment, against specified perils or occasionally on an all risk basis subject to exclusions. ERISA Liability. Liability imposed by law upon officers or other employees operating in a fiduciary capacity for the proper handling of pension funds and other employee benefits. Errors and Omissions Insurance. A form of insurance which covers losses resulting from financial institutions failing to effect insurance coverage. Estimated Premium. A provisional premium which is adjusted at the end of the year. Exclusion. A contractual provision that denies coverage for certain perils, persons, property or locations. Experience Modification. The increase or decrease in premiums resulting from the application of an experience rating plan, usually expressed as a percentage. Expiration. The date indicated in an insurance contract as its termination date. Extended Period of Indemnity. A Business Income coverage that continues coverage for income losses for a period of time after operations have resumed. Extra Expense Insurance. A form that provides reimbursement to the insured for the extra expenses reasonably incurred to continue the operation of a business when the described property has been damaged by a peril covered by the contract. A B C D E F G H I J L M N O P R S T U V W F
Fine Arts Floater. Covers fine arts, such as antiques, leaded glass, and other art work of all types, usually on an all-risk basis. Fire. Combustion which is rapid enough to produce a flame or glow. Fire Legal Liability. An insurance policy which protects the insured against liability incurred when his negligent actions result in the destruction of property which is in his care, custody or control. Fire Wall. A structure (wall) which is designed to seal off fires within a building. "First" Named Insured. The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the "first" named insured rather than requiring notice to all named insured. Flat Cancellation. A policy which in canceled upon its effective date. Floater. A form of insurance that applies to movable property, whatever its location, if it is within the territorial limits imposed by the contract. The coverage "floats" with the property. Flood. A general and temporary condition of partial or complete inundated of normally dry land areas from
Flood Insurance. A form of insurance designed to reimburse property owners from loss due to the defined peril of flood. Frame. A type of construction. A frame building is primarily made with wood frames and joists. Free on Board (FOB). The term has special significance in Marine Insurance, where it is vital to determine when title passes from the seller to the buyer. If the materials are shipped FOB point of destination, the seller is liable for damage caused during the course of transportation. A B C D E F G H I J L M N O P R S T U V W G
General Liability Insurance. A form of insurance designed to protect owners and operators of businesses from a wide variety of liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of an insured, products sold by the insured, operations completed by the insured, and contractual liability. Governing Classification. The classification assigned to the operations of an insured which carries the largest amount of payroll. Guaranteed Cost. A premium charged on a prospective basis, fixed or adjustable, or on a specified rating basis, but never on the basis of loss experience. A B C D E F G H I J L M N O P R S T U V W H
Highly Protected Risk (HPR). Refers to Property risks which meet the standards required for lower rates. Risks of this type are usually protected by sprinklers and have better-than-average construction and occupancy. Hired Automobile. Autos the insured leases, hires, rents, or borrows, but not autos owned by employees or members of their households. Hold Harmless Agreement. A contractual agreement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. A B C D E F G H I J L M N O P R S T U V W I
Increased Hazard. Property Insurance policies provide that coverage shall be suspended when the hazard in a risk is increased beyond that contemplated when the insurance was written. If a dwelling owner commences manufacturing dynamite in his home, the hazard is extremely increased, and coverage could be denied by the insurer if there were a loss. Incurred But Not Reported. This refers to losses, which have occurred during a stated period, usually a calendar year, but have not yet been reported to the insurer as of the date under consideration. Incurred Losses. The losses occurring within a fixed period, whether or not adjusted or paid during the same period. Indemnify. To restore the victim of a loss to the same position as before the loss occurred. Indirect Loss (or Damage). Loss resulting from a peril but not caused directly and immediately by that peril. Insurable Interest. Any interest a person has in a possible subject of insurance, such as a car or home, of such a nature that a certain happening might cause him financial loss. 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 assume, to a specified extent, the losses suffered by the insured. Insurer. The party to an insurance arrangement who undertakes to indemnify for losses, provide pecuniary benefits, or render services. A B C D E F G H I J L M N O P R S T U V W J
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Lapsed Policy. One which has been allowed to expire because of nonpayment of premiums. Law of Large Numbers. This law states that the larger the number of exposures considered, the more closely the losses reported will match the underlying probability of loss. Legal Liability. Liability under the law as opposed to liability arising from contracts or agreements. Liability Insurance. That insurance which pays and renders service on behalf of an insured for loss arising out of his or her responsibility to others imposed by law or assumed by contract. Libel. A written statement about someone which is personally injurious to that individual. Liberalization Clause. A clause in Property Insurance contracts which provides that if policy or endorsement forms are broadened by legislation or ruling from rating authorities and no additional premium is required. License and Permit Bonds. Bonds often required by jurisdictions to be posted by persons performing certain services, such as security dealers and plumbers. Limit of Liability. The maximum amount for which an insurer is liable as set forth in the contract. Liquor Liability Insurance. See Dram Shop Liability Insurance. Loss Adjustment Expense. The cost of adjusting losses, excluding the amount of the loss itself. Loss Control. Any combination of actions taken to reduce the frequency or severity of losses. Installing locks, burglar or fire alarms and sprinkler systems are loss control techniques. Loss of Use Insurance. Coverage to compensate an insured for the loss of use of his property if it cannot be used because of a peril covered by the policy. Loss Payable Clause. A provision is Property Insurance contracts that authorized payment to persons other than the insured to the extent that they have an insurable interest in the property. Loss Payee. The party to whom money or insurance proceeds is to be paid in the event of loss, such as the lienholder on an automobile or the mortgagee on real property. Loss Ratio. The losses divided by the premiums paid. A B C D E F G H I J L M N O P R S T U V W M
Mobile Equipment. A term defined in General Liability policies as land vehicles, including machinery and apparatus attached thereto, whether or not self propelled, and
Modified Fire-Resistive Construction. A building which has exterior walls, floors and roof constructed of masonry or fire-resistive materials. Monopolistic State Fund. The state-operated company in those states having laws which require that all businesses buy Workers Compensation Insurance from the state. Mortgage (or Mortgagee) Clause. A provision attached to a Fire or other direct damage policy that covers mortgaged property, specifying that the loss reimbursement shall be paid to the mortgagee as the mortgagee's interest may appear, that the mortgagee's rights of recovery shall not be defeated by any act or neglect of the insured, and giving the mortgagee other rights, privileges, and duties. Motor Vehicle Record (MVR). The record of an automobile driver's accidents and/or traffic violations. A B C D E F G H I J L M N O P R S T U V W N
Named Non-Owner Policy. An Automobile Insurance policy issued to someone who does not own an automobile, but who drives borrowed or rented autos. Negligence. Failure to use that degree of care which an ordinary person on reasonable prudence would use under the given or similar circumstances. No-Fault Insurance. Many states have passed laws permitting the individual automobile accident victim to collect directly from his or her own insurance company for medical and hospital expenses regardless of who was at fault in the accident. Most states do allow the individual to sue the negligent party if the amount of damages exceeds a certain stated limit. Nonowned Auto. Any autos not owned, leased, hired, or borrowed which are used in connection with the business. Nonrenewal. Termination of insurance coverage at an expiration date or anniversary date. Notice of Cancellation. Written notice by an insurer of intent to cancel insurance, or written notice by an insured requesting cancellation. A B C D E F G H I J L M N O P R S T U V W O
Occupational Safety and Health Act (OSHA). A federal statue which established safety and health standards on a nationwide basis. Occurrence. An event that results in an insured loss. Occurrence Coverage. A policy form providing liability coverage only for injury or damage that occurs during the policy period, regardless of when the claim is actually made. Off Premises. A clause in a Property Insurance contract extending coverage away from the premises described in the policy. Officers and Directors Liability Insurance. A type of insurance which protects the officers and directors of a corporation against damages resulting from negligent or wrongful acts which may harm the corporation or its stockholders. Owners, Landlords, and Tenants Liability Insurance (OL&T). Coverage for an insured against legal liability for bodily injury or property damage caused to others by negligence and arising out of the ownership, maintenance, or use of the premises designated in the policy and all operations necessary or incidental to those premises. A B C D E F G H I J L M N O P R S T U V W P
Peak Season Endorsement. An endorsement which provides increased amounts of coverage on inventories during peak seasons, beginning and ending on dates specified in the endorsement. Peril. The cause of a possible loss. Period of Restoration. The period during which Business Income coverage applies. It begins on the date direct physical loss occurs and interrupts business operations, and ends on the date that the damaged property should be repaired, rebuilt or replaced with reasonable speed. Personal Articles Floater. Originally an Inland Marine policy. It can be sold as a separate policy or attached to an existing Property Insurance policy, such as a Homeowners form. Personal Property. Any property of an insured other than real property. Personal Property of Others. Property, other than real property, which is not owned by an insured. Physical Damage. A term indicating damage from such perils as collision, comprehensive, fire and theft or any damage to the vehicle itself. Policy. The written statement of a contract effecting insurance, or certificates thereof, by whatever name called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof. Pollution Liability Coverage Form. Commercial form providing pollution insurance on a "claims made" basis, and also including coverage for clean-up costs. Premises. The particular location of property or a portion thereof as designated in a policy. Premises and Operations Liability Insurance. Liability coverage for exposures arising out of a insured's premises and business operations. Premium. The price of insurance protection for a specified risk for a specified period of time. Private Passenger Automobile. Four-wheeled motor vehicles of the private passengers, station wagon or van type, designed for use on public highways and subject to motor vehicle registration. Pro Rata.
Pro Rata Cancellation. The termination of an insurance contract or bond with the premium charge being adjusted in proportion to the exact time the protection has been in force. Products and Completed Operations Insurance. A major general liability subline which provides coverage for an insured against claims arising out of products sold, manufactured, handled, or distributed, or operations which are complete. Protection Class. The grading of fire protection, determined by the Grading Schedule of Cities and Town, for a given area. This designation is used for all fire rating except for dwellings, in which case the Dwelling Class is used. Punitive Damages. Damages awarded over and above compensatory damages to punish a negligent party because of wanton, reckless, or malicious acts or omissions. A B C D E F G H I J L M N O P R S T U V W R
Robbery. The felonious taking, either by force or fear of force, of the personal property of another. A B C D E F G H I J L M N O P R S T U V W S
Short Rate Cancellation. A cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period. Slander. A spoken statement about someone which is personally injurious to the individual. Statement of Values. Sometimes property is written using a blanket rate and one single limit of liability applying to all locations. Strict Liability. Usually used when referring to Products coverage. The liability that manufacturers and merchandisers may be subject to for defective products sold by them, regardless of fault or negligence. A B C D E F G H I J L M N O P R S T U V W T
Termination. The time the coverage under an insurance policy ends, either because its term has expired or because it has been canceled by either party. Theft. The act of stealing. It includes such acts as larceny, burglary, and robbery. Total Loss. A loss of sufficient size so that it can be said there is nothing left of value. The complete destruction of property. A B C D E F G H I J L M N O P R S T U V W U
Underinsured Motorists Coverage. A coverage in an Automobile Insurance policy under which the insurer will pay damages up to specified limits for bodily injury damages, if the limits of liability under the liable motorist's policy are exhausted and he cannot pay the full amount he is liable for. Uninsured Motorists Coverage. A coverage in an Automobile Insurance policy which the insurer will pay damages to the insured for which another motorist is liable if that motorist is unable to pay because he is uninsured. A B C D E F G H I J L M N O P R S T U V W V
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