Definition Starts with: 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. 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 state’s 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. Top of Page 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. Top of Page 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 contractor’s 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. Top of Page 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. Top of Page 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. Top of Page Fair premium - The premium level that is just sufficient to fund an insurer’s 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. Top of Page 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. Top of Page 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. Top of Page 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 insured’s property and (2) liability exposure of an insured for damage or destruction of someone else’s 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. Top of Page 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. Top of Page Kenney Rule - Concept permitting a property liability insurer to write $2 of new net premiums for each $1 of policy owners' surplus. Top of Page 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. Lloyd’s 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 Lloyd’s 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. Top of Page 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. Top of Page 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 insured’s 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! Top of Page 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 ship’s hull and the ship’s 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 ship’s 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page 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. Top of Page You/Your - These words are used to refer to the named insured in many of the modernized/personalized policy forms. Top of Page 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. Top of Page