| Have you ever wondered
what a term means in your insurance policy? Well we have
selected some terms that you should know when you review
your insurance policy. If a term isn't here that you
need to know contact us and we will explain the term
and also add it to this list of common insurnace terms.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Abandonment: As used in property insurance, prohibits the
insured from abandoning damaged property to the insurance
company for repair or disposal
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 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'
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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, 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 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 Limit: The insured is legally liable
for damages due to bodily injury, sickness, or disease,
including resulting death
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 (obligee) 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 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.
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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 Loss Forms:
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
due to 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
Competitive State Funds:
State-owned and operated facilities that write Workers'
Compensation Insurance solely for that
state
Completed Operations:
A General Liability coverage for the work of the insured
that has 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
Compulsory Insurance:
Insurance that is required by law
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
Consequential Loss: An
indirect loss such as the reduction in value of property
that is the result of a direct damage
loss
Constructive Total Loss:
Term used when damage to property is more than the
value of the property
Contract: An agreement
between two or more parties with characteristics of
mutual assent, competent parties, a
valid consideration and legal subject
Countersignature: The
signature of a licensed agent or representative on
a policy that is required to validate
the policy
Cumulative Injury: A type
of injury which occurs from the repetition of tasks
over an extended length of time
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Data Processing
or EDP Coverage: All risk property insurance
for electronic data processing equipment (computers),
computer programs and data including mechanical breakdown,
electrical
injury and changes in temperature and humidity
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 property
damage (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
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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
Electrical Damage or Injury Exclusion:
An exclusion usually contained in property insurance
policies eliminating coverage
for damage to electrical appliances caused by artificially
generated currents, except for ensuing fire or
explosion
Employee Dishonesty Coverage:
Coverage for theft of money, securities or property
by an employee
Employee Leasing:
A staffing method which an employee leasing company
provides all
or most of its client's employees
Employers Excess Indemnity Insurance:
Insurance coverage purchased by employers that
do not subscribe to the Texas
Workers' Compensation law
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 the insured 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
Estimated Premium:
A preliminary premium amount that could be adjusted
based on a variance
in exposures
Excess and Surplus Lines Insurance:
Coverage that is provided by insurers not licensed
in the states where the risk is
located
Excess Liability Policy:
A policy that provides additional limits in excess
of an underlying liability policy
Exclusion: A circumstance
or peril that is not covered by the policy
Expected or Intended:
An exclusion for injury or damage that is expected
or intended
Expediting Expense Coverage:
Coverage providing reimbursement of expenses for
temporary repairs and costs incurred to
speed up the permanent repair or replacement of
covered property or equipment
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
Extraterritorial Coverage:
The coverage for extending workers' compensation
law to provide benefits for workers hired
in one state but injured while working in another
state
TOP OF PAGE 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
Firewall: A computer that protects a company's private
network from outside internet users
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
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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
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
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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
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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
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Insurer: An insurance
company that provides insurance coverage and
other insurance-related services
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Joint Venture:
A business relationship when two or more
persons join their labor or property for a business
undertaking and share profits.
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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
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
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 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
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
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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
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
a 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 earthmovers, 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
mortgagee named
in the
policy
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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
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
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Occupational Disease:
A condition 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.
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coverages combined into one policy. Refers to a policy
providing both general liability insurance and property
insurance
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 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 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
of use
Property Insurance: First-party insurance for real
and personal property against physical loss or damage
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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 peril
Replacement Cost Coverage Endorsement:
A property insurance provision that changes the valuation
of covered property
to replacement cost with no deduction for depreciation
Return Premium: The
amount of premium due 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
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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 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')
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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
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