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Definition Starts with: A |
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Abandonment - As used in property
insurance, prohibits the insured from abandoning damaged property to the
insurance company for repair or disposal.
Accidental Bodily
Injury - Physical Injury to a person, accidentally sustained directly
and independently of all other causes.
Account Current -
A monthly financial statement provided to an agent by an insurer showing
premiums written, cancellations, endorsements, and commissions.
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.
Acts of God
- Events caused by forces of nature, without human intervention, and not
preventable by reasonable precautions.
Accumulation
Period- The time between the first premium payment and the first
benefit payout under a deferred annuity.
Actual Cash Value
(ACV) - Cost to repair or replace damaged property with materials of
like kind and quality, less depreciation.
Actuarially
Fair - The price for insurance which exactly represents the expected
losses.
Additional Insured - A person other than the
named insured who is protected under the terms of the contract. Usually,
additional insureds are added by endorsement or referred to in the wording of
the definition of "insured" in the policy itself.
Admitted
(carrier) - An admitted carrier or standard carrier is an insurance
company that has received a license from the state department of insurance
giving the company the authority to write specific lines of insurance. These
companies are also bound by rate and form regulations, and are strictly
regulated to protect policy holders from a variety of illegal and unethical
practices, including fraud. Admitted carriers are also required to financially
contribute to the state guarantee fund, which is used to pay for losses if an
insurance carrier becomes insolvent or unable to pay the losses due their
policyholders. (see also Non-Admitted).
Age Limits -
Stipulated minimum and maximum ages below and above which the company will not
accept applications or may not renew policies.
Agency Contract
(or Agreement) - The document which establishes the legal relationship
between an agent and an insurer.
Agent - An insurance
company representative licensed by the state who solicits, negotiates or
effects contracts of insurance, and provides service to the policyholder for
the insurer.
Aggregate - The maximum amount an insurance
company will pay during the policy.
Alien Insurer -
insurance company formed according to the legal requirements of a foreign
country. In order for an alien insurer to be able to carry on general
operations and sell its products in a particular state in the United States, it
must conform to that states rules and regulations governing insurance
companies.
All Risk - Insurance that covers loss caused by
all physical damage perils, other than those specifically excluded in the
policy contract.
Allied Lines - A term for forms of
property insurance allied with fire insurance, covering such perils as
windstorm, hail, explosion, and riot.
Application - A
form with the information needed for an insurance company to underwrite and
rate a specific policy.
Appurtenant Structures -
Buildings or structures other than the insured's residential dwelling. (i.e.,
garage, shed, barn, etc.)
Assurance Insurance - These
terms are today generally accepted as synonymous, although not originally so.
The term "assurance" is used more commonly in Canada and Great Britain than in
the United States.
Audit - A verification of the
financial records, usually payroll or receipts, of an organization to determine
exposures and premiums. |
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 Basic Limits -
The lowest limits of liability coverage that can be purchased by a
policyholder--often the same as the minimum amount of insurance required by
law. The basic limits are those for which the base rate is developed. If higher
limits are requested by the insured, the insurer applies an increased limits
factor to the base rate and other factors used to calculate the premium.
Binder - The act of binding insurance coverage. A state
in the insurance transaction equivalent to a temporary contract of insurance
coverage.
Boat Owners Package Policy - A special package policy
for boat owners that combines physical damage insurance, medical expense
insurance, liability insurance, and other coverages in one contract.
Boiler & Machinery Insurance - Coverage for loss caused by
mechanical or electrical equipment breakdown, including damage to the
equipment.
Brands & 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 Form: See Dwelling Property;
Homeowners Policy.
Broker - A representative of
the insured assisting in the placement of insurance with carriers. While an
agent is an authorized representative of an insurance company, a broker
represents the insured.
Builders Risk - Insurance against
loss to buildings or specified structures during the course of their
construction. Coverage may or may not include the material involved in their
construction.
Business Interruption - A form of insurance
which protects against lost profits due to the inability to conduct one's
business as a result of an insured peril such as fire.
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 contract before the normal end of the policy period or effective
date.
Cargo Insurance - Type of ocean marine insurance
that protects the shipper of the goods against financial loss if the goods are
damaged or lost.
Carrier - The insurance company which
provides coverage.
Cash Value (Actual) - The cost of
replacing or restoring property to its condition prior to a loss minus the
depreciation.
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.
Causes-of-Loss Form - Form added to commercial property
insurance policy that indicates the causes of loss that are covered.
Certificate of Insurance - A document providing evidence
that insurance has been purchased.
Claim - A request for
payment of a loss which may come under the terms of an insurance contract.
Claims Made Basis Liability method of
determining whether or not coverage is available for a specific claim. If a
claim is made during the time period when a liability policy is in effect, an
insurance company is responsible for its payment, up to the limits of the
policy, regardless of when the event causing the claim occurred. Experts often
advise that it is extremely important, when purchasing a property or casualty
policy, to determine if claims are paid on claims made basis or a claims
occurrence basis.
Claim Expense - Expenses of settling or
investigating a claim.
Claimant - The person presenting a
claim.
Claims Made -
see Claims Made Basis Liability Coverage
Claims Made Form - see Claims Made
Basis Liability Coverage
Claims-made policy - A liability
insurance policy under which coverage applies to claims filed during the policy
period.
Claims Occurrence
Basis Liability - method of determining whether or not coverage is
available for a specific claim. If a claim arises out of an event during the
period when a policy is in force, the insurance company is responsible for its
payment, up to the limits of the policy, regardless of when the business
submits the claim. Experts often suggest that it is extremely important, when
purchasing a property or casualty insurance policy, to determine if claims are
paid on claims made basis or a claims occurrence basis.
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.
Collision - The impact between a vehicle and
another vehicle or object.
Commercial General Liability Form (CGL)
liability coverage section of a SIMPLIFIED COMMERCIAL LINES
PORTFOLIO POLICY (SCLP). Provides for separate limits of coverage for
general liability, fire legal liability, products and completed operations
liability, advertising and personal liability, and medical payments. An
AGGREGATE LIMIT of liability is in force for the general
liability, fire legal liability, advertising and personal liability, and
medical payment claims. When total claims for all of these areas exceed a given
annual aggregate limit of liability, the policy limits are said to be exhausted
and no more claims for that year will be paid under the policy. There is also
an aggregate limit of liability in force for products and completed operations
liability claims. This form replaced the COMPREHENSIVE GENERAL
LIABILITY INSURANCE form.
Competitive State Funds
- State-owned and operated facilities that write Workers' Compensation
Insurance solely for that state. Completed Operations Insurance coverage
for a contractors liability for injuries or property damage suffered by
third parties as a result of the contractor completing an operation. The
contractor must take reasonable care in rendering a project safe and free from
all reasonable hazards. See also COMMERCIAL GENERAL
LIABILITY FORM (CGL).
Compulsory Insurance - Insurance
that is required by law.
Concealment - Failure to
disclose facts which may void an insurance policy.
Concurrent
Causation - Legal doctrine that states when a property loss is due to
two causes, one that is excluded and one that is covered, the policy provides
coverage.
Conditions - Provisions inserted in an
insurance contract that qualify or place limitations on the insurer's promise
to perform.
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.
Coverage
Contract - A contract between an insurance company and an insured that
specifies the type and extent of coverage purchased, and under which conditions
that insurance is in effect. |
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Damages - sum the insurance
company is legally obligated to pay an insured for losses incurred.
Dec Page (Declarations) - The page of an insurance
contract that provides information of insured and used for underwriting and
rating purposes and identification.
Deductible - A clause
in an insurance contract which states that the insured will pay a specified
amount for a covered loss prior to the insurance company issuing payment. The
company only pays that amount which is above and beyond the deductible. Also
known as an SIR - Self Insured Retention.
Deposit Premium
- The premium deposit paid by a prospective policy holder when an application
is made for an insurance policy. It is usually equal, at least, to the first
month's estimate premium and is applied toward the actual premium when billed.
Depreciation A decline in the value of property caused by
accident, wear and tear, deterioration or the passage of time.
Differences in Conditions (DIC) - A non-admitted
international insurance policy that can provide first-dollar property or
liability coverage for perils not covered by admitted policies issued in a
foreign country. It can also be used for excess limits over local admitted
policies. A DIC policy is designed to supplement coverage purchased in a
foreign country and is issued by the international department of an insurer or
Lloyd's of London for a multinational corporation.
Direct
Loss - Financial loss that results directly from an insured peril.
Directors & Officers
Liability Insurance (D&O) coverage when a director or
officer of a company commits a negligent act or omission, or misstatement or
misleading statement and a successful libel suit is brought against the company
as a result. Usually a large deductible is required. The policy provides
coverage for directors and officers liability exposure if they are
sued as individuals. Entity and Employment Practices Liability coverage can
also be purchased. Coverage is also provided for the costs of defense such as
legal fees and other court costs.
Dividend - A return of
part of the premium on participating insurance to reflect he difference between
the premium charged and the combination of actual mortality, expense and
investment experience. Such premiums are calculated to provide some margin over
the anticipated cost of the insurance protection.
Domestic Insurer
insurance company incorporated according to the laws of the state in which a
risk is located and the policy issued. The insurance company is
domiciled in that state.
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.
Dwelling Property - (1) Property insurance
policy that insures the dwelling at actual cash value, other structures,
personal property, fair rental value, and certain other coverages. Covers a
limited number of perils. (2) Property insurance policy that insures the
dwelling and other structures at replacement cost. It adds additional coverages
and has a greater list of covered perils than the first Dwelling Property
definition. (3) Property insurance policy that covers the dwelling and other
structures against direct physical loss from any peril except for those perils
otherwise excluded. However, personal property is covered on a named-perils
basis. |
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Employers Liability - A form of
liability insurance which protects the employer against claims or suits brought
by an employee alleging injury during and within the scope of employment.
Employer Practices and Employer Conditions are two types of Employers Liability
Insurance. Endorsement: An addendum to a policy which indicates a change to the
manuscript policy either to include or exclude coverage
Employment Practices Liability Insurance
(EPLI) policy that provides protection in the event of
legal actions resulting from charges of harassment, discrimination, wrongful
termination of employment, defamation, and invasion of privacy.
Environmental Impairment
Liability negligent acts and/or omissions by the
individual(s) and the organization(s) resulting in damage to the environment.
For example, pollution of the environment suits against manufacturers are quite
common today. The pollution risk is an excluded insurable risk under most
liability policies; however, insurance coverage in some instances is becoming
available under ENVIRONMENTAL IMPAIRMENT LIABILITY(EIL)
INSURANCE policies. Environmental Impairment Liability (EIL)
Insurance coverage in the event that negligent acts
and/or omissions by individual(s) and organization(s) result in damage to the
environment and a liability suit against these parties.
Errors
& Omissions (E&O) policies generally available to
the various professions that require protection for negligent acts and
or/omissions resulting in bodily injury, personal injury, and/or property
damage liability to a client (DAMAGES).
Excess and Surplus Lines Broker - A specialty
insurance broker who obtains coverage on risks that are difficult to place,
unique or large through insurance companies not licensed to do business in the
broker's state of domicile. These brokers are subject to special licensing
requirements and usually act as wholesale brokers to agents.
Excess and Surplus Lines 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. (See also
Umbrella Liability and Surplus Lines.)
Exclusions -
Provisions in an insurance contract which outline those situations, perils.
Losses, persons or things for which coverage is not provided.
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.
Extortion - Surrender of property away
from the premises as a result of a threat to do bodily harm to the named
insured, relative, or invitee who is being held captive. |
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Fair premium - The premium level
that is just sufficient to fund an insurers expected costs and provide
insurance company owners with a fair return on their invested capital.
Fiduciary - A person who holds something in trust for
another.
Final Release - A legal contract, between two or
more parties, acknowledging the termination of a claimant's right to sue
against the released party. Typically issued in exchange for a settlement
payment.
Fire Department Service Charge Coverage -
Coverage in a property insurance policy for charges incurred by the insured
from a fire department for their services in fighting a fire.
Fire Legal Liability Coverage - Liability coverage for
the insured's legal liability for fire damage to premises rented by the
insured.
Fire Wall - A wall designed to prevent the
spread of fire from one part of a building to another.
Flat
Cancellation - The full cancellation of a policy as of the effective
date of coverage which requires the return of paid premium in full.
Floater - Property subject to movement or transport from
site to site. A policy which covers property that can be moved or transported.
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.
Foreign Insurer - insurance company whose domicile is in
a state other than the one in which the company is writing business. See
also NON ADMITTED INSURER
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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 General Average -
In ocean marine insurance, a loss incurred for the common good that is shared
by all parties to the venture.
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 - Coverage that pertains, for
the most part, 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.
Grace Period - A
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.
Graded Commission Scale - A commission scale providing
for payment of a high first-year commission and lower renewal commissions.
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 Hard Market That
part of the insurance sales cycle in which competitive pricing is at a minimum
as companies charge the premiums necessary to meet their underwriting losses in
order to avoid insolvency and boost capacity; usually associated with a sharp
decline in capacity (see Soft Market).
Hold Harmless
Agreement - A contractual agreement that requires one contracting party
to assume certain legal liabilities of the other party.
Homeowners Policy - A multiple peril contract for owners
or occupants of dwellings generally including fire, theft and liability
coverage. A homeowners policy is a package policy combining many additional
coverages not included in basic fire policies.
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.
Hull Insurance - (1) Class of ocean marine insurance that
covers physical damage to the ship or vessel insured. Typically written on an
"all-risks" basis. (2) Physical damage insurance on aircraft- similar to
collision insurance in an automobile policy. |
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Immediate Annuity - An annuity
providing for payment to begin immediately.
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.
Indemnity - Legal principle that specifies an insured
should not collect more than the actual cash value of a loss but should be
restored to approximately the same financial position as existed before the
loss. 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
Inland Marine Insurance
(Transportation Insurance) - BUSINESS RISKS coverage for (1)
property damage or destruction of an insureds property and (2) liability
exposure of an insured for damage or destruction of someone elses
property under his or her care, custody, or control. The insured (shipper)
needs this insurance because the carrier (who can also be the insured and
purchase inland marine insurance) may be found not at fault for damage to a
property; or the carrier may not have any insurance or adequate insurance.
Perils covered include fire, lightning, windstorm, flood, earthquake,
landslide, theft, collision, derailment, overturn of the transporting vehicle
and collapse of bridges. Insurable Interest - expectation of a monetary
loss that can be covered by insurance. Insurable interest varies according to
the type of policy. These relationships give rise to insurable interest: (1)
owner of the property; (2) vendor (to the extent of the unpaid balance due on
the property sold to the vendee); (3) vendee; (4) bailee (to the extent of the
value of the property under his or her temporary care, custody, and control);
(5) bailor; (6) life estates; (7) fees simple estates; (8) mortgagee (to the
extent of the unpaid balance due on the loan to which the property is pledged
as security); and (9) mortgagor.
Insurable Risk - The
conditions that make a risk insurable are (a) the peril insured against must
produce a definite loss not under the control of the insured, (b) there must be
a large number of homogeneous exposures subject to the same perils, (c) the
loss must be calculable and the cost of insuring it must be economically
feasible, (d) the peril must be unlikely to affect all insured simultaneously,
and (e) the loss produced by a risk must be definite and have a potential to be
financially serious.
Insurance to Value - Insurance
written in an amount equal to the value of the property or which meets
coinsurance requirements.
Insurance Commissioner - A
state officer who administers the state's insurance laws and regulations. In
some states, this regulator is called the director or superintendent of
insurance. Insurance Services Office (ISO): Major rating organization in
property and liability insurance that drafts policy forms for personal and
commercial lines of insurance and provides rate data on loss costs for property
and liability insurance lines. (www.iso.com)
Insured - A
person in whose name the contract of insurance has been issued (named of
insured) and other parties to whom the benefits of the contact may be extended
(an additional named of insured).
ISO Form - See
Insurance Services Office. |
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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.
Judgment Rating
- Rate-making method for which each exposure is individually evaluated and the
rate is determined largely by the underwriter's judgment.
Judicial Bond - Type of surety bond used for court
proceedings and guaranteeing that the party bonded will fulfill certain
obligations specified by law, for example, fiduciary responsibilities.
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 Kenney Rule -
Concept permitting a property liability insurer to write $2 of new net premiums
for each $1 of policy owners' surplus. |
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Lapse - The termination of an
insurance policy, subject to a grace period and reinstatement clauses.
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.
Level Commission Scale: A commission scale
providing for payment of commissions at the same rate every year the policy is
in force.
Liability Insurance - coverage for all
sums that the insured becomes legally obligated to pay because of bodily injury
or property damage, and sometimes other wrongs to which an insurance policy
applies. Personal liability policies include COMPREHENSIVE
PERSONAL LIABILITY (CPL), HOMEOWNERS INSURANCE POLICY, PERSONAL AUTOMOBILE
POLICY (PAP), Personal Umbrella Liability, and the Uninsured Motorist
Endorsement. Business liability policies include BUSINESS
AUTOMOBILE POLICY (BAP), BUSINESSOWNERS POLICY, Completed Operations
and Products Liability, COMMERCIAL GENERAL LIABILITY
INSURANCE (CGPL), Employers Liability and Workers compensation,
MANUFACTURERS AND CONTRACTORS LIABILITY (M&C), OWNERS,
LANDLORDS AND TENANTS LIABILITY INSURANCE (OL&T), Physicians,
Surgeons and Dentist Professional Liability, STOREKEEPERS
LIABILITY INSURANCE, Umbrella Liability Policy, and the Uninsured
Motorists 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. Lloyds of London - insurance facility
composed of many different syndicates, each specializing in a particular risk;
for example, hull risks. Lloyds provides coverage for primary jumbo risks as
well as offering REINSURANCE AND RETROCESSIONS.
Membership in a syndicate is limited to individuals (Companies have recently
been approved as well now) with large net worth, and each member may belong to
one or more syndicates depending upon his or her net worth. Although much of
the publicity Lloyds receives involves insuring exotic risks such as an
actress legs, this represents only a very small portion of its total
business, most of which involves reinsurance and retrocessions.
Loss - The happening of the event for which insurance
pays.
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 or Loss Runs - 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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 Managing General
Agent - Any person, firm, association or corporation that negotiates
and binds ceding reinsurance contracts on behalf of an insurer or that manages
all or part of the insurance business of an insurer, including the management
of a separate division, department or underwriting office, that acts as an
insurance producer or agent for the insurer.
Manual Rate
- The premium rate developed for a group insurance coverage from the company's
standard rate tables normally referred to as its rate manual or underwriting
manual.
Marine Insurance - A form of insurance primarily
concerned with means of transportation and communication, and with goods in
transit (see Inland Marine Insurance and Ocean Marine Insurance).
Minimum Premium - The least amount of premium for which a
policy or coverage may be issued or initiated.
Mutual Insurance
Company - An insurance company owned by its policyowners. |
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Name of Insured - The principal
contracting party designated as the policyholder.
Named
Perils - Specified causes of loss covered under a property insurance
policy. No coverage is provided for perils not listed.
Net
Premium - The portion of the premium rate which is designed to cover
benefits of the policy, but not expenses, contingencies, or profit. The term is
also used to describe the portion of the premium remitted to the home office by
an agent after deduction of the agent's commission.
Non Admitted
Insurance policy purchased by an insured from an insurer
in another state. This insurer is not licensed in the state where the
insureds risk is located. Not licensed DOES NOT mean the company is not
regulated by the state! Non
Admitted Insurer company not licensed by a particular
state to sell and service insurance policies within that state. Not licensed
DOES NOT mean the company is not regulated by the state! |
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Occurrence An accidental event of an
injurious nature neither expected nor intended by the
insured.
Ocean Marine Insurance coverage in
the event of a marine loss. Marine loss is damage or destruction of a
ships hull and the ships cargo (freight) as the result of the
occurrence of an insured peril. Perils insured against include collision of the
ship with another ship or object; the ship sinking, capsizing, or being
stranded; fire; piracy; jettisoning (throwing overboard of property to save
other property); barratry (fraud or other illegal act by a ships master
or crew, resulting in damage or destruction of the ship and/or cargo), and
various other liability exposures. To be covered, an act cannot involve prior
knowledge by the owner of the ship or its cargo. Excluded are wear and tear,
dampness, decay, mold, and war.
Open Perils - A property
insurance form that insures against any risks of loss that are not specifically
excluded. This term is frequently used instead of "all risks."
Operating Ratio: The sum of expenses and losses expressed
as a percent of earned premium.
Overriding Commission
(Overwrite) - A commission paid to general agents or agency managers in
addition to the commission paid the soliciting agent or broker. |
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Package Policy - A combination of
two or more individual polices or coverages into a single policy. A homeowners
policy, for example, is a package combining property, liability and theft
coverages for the homeowner.
Payroll Limitation - A limit
on the amount of payroll for certain classifications used for the development
of premium,
Peril - The cause of loss.
Policy - The legal document issued by the company to the
policyholder, which outlines the conditions and terms of the insurance; also
called the policy contract or the contract.
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 sum paid by a policyholder to
keep an 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.
Product Liability
Insurance coverage usually provided under the
COMMERCIAL GENERAL LIABILITY INSURANCE (CGL); it can also
be purchased separately. See also PRODUCTS AND COMPLETED
OPERATIONS INSURANCE. Product Recall Exclusion exception in
general liability policies for all expenses associated with product recall. In
recent years, there have been increasing instances of federal recalls. In
addition, there have been many instances of deliberate tampering and of
manufacturers issuing their own recalls. In either event, the cost of
identifying the products, communicating with consumers, inspecting the returned
products, and repairing or replacing them can be enormous. These costs are
excluded from general liability policies, but PRODUCT RECALL
INSURANCE can be purchased for this purpose.
Product Recall Insurance
coverage for the expenses incurred by a business resulting from the
recall of products, whether defective or not. See also PRODUCT
LIABILITY INSURANCE; PRODUCT AND COMPLETED OPERATIONS INSURANCE; PRODUCT RECALL
EXCLUSION. Products
and Completed Operations Insurance coverage for an
insured manufacturer for claims after a manufactured product has been sold
and/or a claim results from an operation, which the manufacturer has completed.
See also COMPLETED OPERATIONS INSURANCE.
Professional Liability Insurance
- coverage for specialists in various professional fields. Since
basic liability policies do not protect against situations arising out of
business or professional pursuits, individuals who hold themselves out to the
general public as having greater than average expertise in particular areas
purchase professional liability insurance. See also Errors and Omissions
(E&O) Property real (land and attachments) and
personal (movable effects not attached to land). Both classifications of
property give rise to an insurable interest. See also INSURABLE INTEREST; PROPERTY AND CASUALTY INSURANCE
PROVISIONS
Proof of Loss - Documentary evidence required
by an insurer to prove a valid claim exists. It usually consists of a claim
form completed by the insured and the insured's attending physician. For
medical expense insurance itemized bills must also be included.
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. |
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 Quote - A price
estimate given to decide which company a formal application will be submitted.
The company may be legally bound to honor this quote in some jurisdictions
and/or lines of business. |
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 Rate - The
pricing factor upon which the insurance buyer's premium is based.
Recreational Vehicle - A gasoline powered and operated
vehicle designed for sports use, or for travel on unusual or extreme terrain.
Reinstatement - The resumption of coverage under a policy
which has lapsed.
Reinsurance - The acceptance by one or
more insurers, called reinsurers, of a portion of the risk underwritten by
another insurer who has contracted for the entire coverage.
Renewal - Continuance of coverage under a policy beyond
its original term by the insurer's acceptance of the premium for a new policy
term.
Rental Value - Fair rental value of the building or
parts thereof, as furnished and equipped by the owner. A form of insurance
against the loss of rents or rental value of the property.
Replacement Cost - The total cost of labor, materials and
services necessary to replace property in its entirety, with materials of like
kind and quality, without allowance for increased cost.
Retrospective Rating - Rating procedure which allows
adjustment of an insured's final rate on the basis of the insured's own loss
experience.
Risk - The chance of loss. Also used to refer
to the insured or to property covered by a policy.
Run-off
Company - An insurance company that is being wound up or otherwise not
underwriting business in a particular line. It is thus letting its present
insurance policies run to their expiration dates. |
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 Securities - In
crime insurance, all negotiable or non negotiable instruments or contracts
representing either money or other property. It includes stamps, tokens and
tickets, but does not include money.
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.
Soft Market - That part of the
insurance sales cycle in which competition is at a maximum as insurance
companies use their excess capacity to sell more policies at lower prices (see
Hard Market).
Special Risk Insurance - Coverage for risks
or hazards of a special or unusual nature.
Subrogation -
Substitution of one party for another in the attribution or assignment of
rights; in insurance, a preliminary process to the recovery of funds advanced
on behalf of an insured who has sustained damages alleged to have been caused
by another party.
Surplus - The amount by which the value
of an insurer's assets exceeds its liabilities, i.e., the net worth of an
insurance company.
Surplus Lines Insurance - (1) A risk
or a part of a risk for which there is no normal insurance market available.
(2) Insurance written by non-admitted insurance companies. |
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 Testamentary
trust - A trust created through the will of its creator.
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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 Umbrella Liability
Insurance - A form of excess liability insurance that provides very
substantial limits of coverage over and above the limits of an underlying
liability policy. A deductible or self insured retention generally
applies.
Underlying Insurance Policy - A policy providing
coverage below an umbrella or excess policy in a layered program.
Underwriter - (1) a company that receives the premiums
and accepts responsibility for the fulfillment of the policy contract; (2) the
company employee who decides whether or not the company should assume a
particular risk; (3) the agent who sells the policy.
Unearned
Premium - That portion of the policy premium that represents the
unexpired policy term.
Uninsurable Risk: One not
acceptable for insurance due to excessive risk. |
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 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.
Voluntary
Market - The market where one seeking insurance obtains insurance in
the open market with no help from the state, through an insurer of his or her
own selection. |
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 Waiver of Premium
- A provision in some policies to relieve the insured of premium payments
falling due during a period of continuous total disability that has lasted for
a specified length of time, such as three or six months.
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.
Written
Premiums - The entire amount of premiums due in a year for all polices
issued by an insurance company. |
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 X Table - A
designation sometimes used to refer to an experimental table or a draft of a
table that has not developed to a point of satisfaction or for actual use in
rating. |
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 You/Your - These
words are used to refer to the named insured in many of the
modernized/personalized policy forms. |
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 Zone System - A
system developed by the NAIC for the triennial examination of insurers. Under
the system, teams of examiners are formed from the staffs of several states in
each of the geographical zones. The results of their examinations are then
accepted by all states in which an insurer is licensed, without the necessity
of each state having to conduct its own examinations. |
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