Property and Casualty Insurance Terms

Errors and Omissions

A Professional Liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.

Primary Policy

A basic, fundamental insurance policy which pays first with respect to other outstanding policies.

Occurrence

A broader definition of loss, which differs from accident in that it includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.

Hazard

A circumstance or condition that increases the likelihood of a loss.

Businessowners Policy (BOP)

A commercial package policy designed for certain types of small businesses, combining Property and Liability coverages. Very similar to a Commercial Package Policy (CPP).

Debris Removal

A coverage provided in many property contracts that reimburses the insured for expenses involved in removing debris produced by a loss from a peril insured against

Mysterious Disappearance

A disappearance of property with no physical evidence as to the location, time or the manner of loss

Nationwide Definition

A document designed to categorize and classify risks eligible for ocean or inland marine insurance

Loss Valuation

A factor in determining the premium charged and the amount of insurance required

Products and Completed Operations

A form of General Liability insurance that covers a company against liability arising out of its products (a manufacturer) or its completed operations (a contractor or architect).

Inland Marine Insurance

A form of insurance originally designed as an extension of Marine coverage to insure transportation of goods over land. Today, it covers a variety of portable property, in addition to goods in transit.

Marine Insurance

A form of insurance primarily designed to cover property in transport over land or sea

Second-Injury Fund

A fund established under Workers Compensation laws in most states to help pay any increased compensation that may result when an employee with a previous injury is injured again.

Strict Liability

A liability that refers to damages caused by defective products even though the manufacturer's fault or negligence cannot be proven.

Indirect Loss

A loss that results from a named peril, but not directly caused by it

Commercial Package Policy (CPP)

A multi-peril, multiline policy that provides a broad spectrum of Property and Casualty coverages for businesses that may include any of the seven coverage parts: general liability, commercial property, inland marine, commercial auto, equipment breakdown, crime and farm

Garage Policy

A policy that provides coverage for garage businesses (dealers, service stations, garages, parking lots, etc.). Includes coverage for Liability, Physical Damage, and Garagekeepers Losses arising out of owned, nonowned, and hired autos.

Monoline Policy

A policy written separately as a single coverage

Endorsement

A printed addendum to a contract that is used to change the policy's original terms, conditions, or coverages.

FAIR plans (Fair Access to Insurance Requirements)

A program established by law that makes property insurance available and affordable to insureds who might otherwise be uninsurable because of environmental hazards

Insuring Agreement

A section of an insurance policy that contains the insurer's promise to pay, the description of coverage provided and perils insured against

Declarations

A section of an insurance policy that includes the basic underwriting information, such as the insured's name, address, amount of coverage and premiums and a description of insured locations, as well as any supplemental representations by the insured

Combined Single Limit

A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.

blanket insurance

A single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations.

Representation

A statement made by the applicant of the insurance application that is believed to be true

Proof of Loss

A sworn statement that must be furnished by the insured to the insurer before any loss can be paid under the policy

Casualty/Liability Insurance

A third-party insurance that covers the insured's legal responsibilities in an accident or negligent act.

absolute liability

A type of liability that occurs due to hazardous activities or dangerous operations

Proximate Cause

An act or event that is the immediate or actual cause of a loss.

appraisal

An assessment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid.

agent

An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer.

Insurance Services Office (ISO)

An organization made up of member companies that analyzes statistics collected from members and then establishes and files standard rates for many lines of insurance. Also develops and files standardized policy forms on behalf of members.

accident

An unplanned, unforeseen event which occurs suddenly and at an unspecified place.

Named Insured

Any person, firm, or corporation, or any member thereof, specifically designated by name as insured(s) in a policy, as distinguished from the others who, though unnamed, are protected under some circumstances.

Uninsured Motorist Coverage (UM)

Automobile Coverage designed to provide Bodily Injury protection for the insured should she be involved in an accident in which the driver at fault has no insurance to cover the loss.

Surety Bond

Bond that guarantees that someone will perform faithfully whatever she agrees to do or that someone will make an agreed-upon payment to another party. Note that in a surety bond, there are 3 parties: the principal, who has agreed to perform the obligation; the obligee, for whose benefit the bond is written and the surety, the insurer that provides the bond in consideration for the premium paid.

Peril

Cause of loss

Underinsured Motorist Coverage (UIM)

Coverage in an automobile insurance policy under which the insurer will pay costs up to specified limits for bodily injury if the liable driver's policy limits are exhausted or insufficient

Employers Liability Coverage

Coverage provided under a Workers Compensation policy to cover the employer's liability arising out of employees' work-related injuries.

Personal Auto Policy

Easy-to-read auto policy that provides broad coverage for both owned and nonowned autos that are used, maintained and / or operated by the insured and family

Supplementary Payments

Found in most Liability contracts. Supplementary Payments provide "extra" coverage over and above the insured's Limit of Liability. Included are first aid, bond premiums, accrued interest on judgments, etc.

Retention Limit

In an Umbrella Liability policy, the amount the insured must pay for a loss not covered by an underlying policy, before the Umbrella will begin to cover losses.

Stated-Value Policy

Insurance contract written to insure an item of property for a specific amount of insurance. Used in insuring hard-to-value items, such as fine arts.

Flood Insurance

Insurance designed to reimburse property owners for loss due to flood or to flood-related erosion. Administered through the Federal Insurance Administration, but marketed through independent agents.

Workers Compensation Insurance

Insurance that covers an employer's obligations under workers compensation laws, which make the employer responsible for stated damages in the event of a work-related injury or illness. Workers compensation coverage also includes separate coverage for employers liability

Liability Insurance

Insures the individual for financial losses that may arise out of the person's responsibilities to others imposed by law or contract.

bodily injury liability

Legal liability arising from death or physical trauma to a person as a result of a negligent or purposeful act by an insured.

Property Damage Liability

Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured

Professional Liability

Liability arising out of the rendering or failure to render services of a professional nature.

Personal Injury Coverage

Liability coverage for third-party claims for damages that are other than physical, such as libel, slander, false arrest, wrongful eviction, invasion of privacy, etc.

Contingent Liability

Liability that an insured person or business incurs because of the actions of others (family or employees), also called vicarious liability

Ocean Marine Insurance

Marine insurance designed to provide broad coverage for cargo and ships in transit over sea. Includes Cargo insurance, Hull insurance, and Liability coverage (Protection and Indemnity).

Comprehensive Personal Liability

Nonbusiness Liability exposure of individuals who are insured under this policy, incorporated into homeowners policies

Private Passenger Autos

Ordinary cars, station wagons and jeeps, utility autos (pickups, panel trucks, and delivery vans not used commercially), and utility trailers designed to be pulled by a private passenger auto.

Personal Property Floater

Personal Inland Marine floater that provides All-Risk coverage on unscheduled personal property.

Personal Articles Floater (PAF)

Personal Inland Marine insurance that provides All-Risk coverage on nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.

Direct Loss

Physical damage to buildings and/or personal property as a result of direct consequence of a particular peril.

Specified-Peril

Policies that insure against only the Perils named, contrary to All-Risk policies which cover all perils except those that are excluded. (Also called Named Peril policies)

Removal

Process of removing property for the purpose of preserving it from a peril insured against

Nonowners Automobile Liability Insurance

Protection for the policyholder against claims for bodily injury and property damage liability caused by his/her employees or others using autos not owned or hired by the insured while conducting business. A Named Nonowner policy protects an individual who drives only borrowed or rented cars.

Floater Policy

Protection that follows moveable property, covering it wherever it may be, rather than applying only at a fixed location, such as a Personal Articles Floater (PAF).

Vandalism and Malicious Mischief (VMM)

Protects property against damage caused by vandals. May be added by Endorsement to the DP-1 Basic Form; included coverage in many other Property forms.

Umbrella Liability Policy

Provides broad coverage for an insured's liability over and above liability covered by underlying contracts or retention limits.

Contractual Liability

Provides coverage against liability arising out of an insured's contractual obligations

adjuster

Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company.

Liability

Responsibility under the law

Financial Responsibility Laws

State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.

Multi-Peril Policy

Technically, an insurance policy that insures against more than one peril. More commonly, an insurance policy that provides coverage against both property and casualty perils.

Open Peril

Term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against "any risk of loss" that is not specifically excluded.

Named Peril

The cause of loss specifically covered by the insurance policy

Replacement Cost

The cost to replace damaged property with like kind and quality at current price, without any deduction for depreciation.

Other Insurance

The existence of another contract covering the same interest and Perils. Sometimes called Pro Rata Liability, because the insurers pay claims according to the proportion of premiums paid to each.

National Flood Insurance Program

The federal government's program to provide flood insurance at subsidized rates

First Named Insured

The individual whose name appears first on the policy's declaration

Depreciation

The lessening of value of real and personal property due to age and wear and tear

Limits of Liability

The maximum amount of money the insurance company will pay for a particular loss, or for loss during a period of time.

Deductible

The portion of the loss that is to be paid by the insured before any claim benefits may be paid by the insurer

Pro Rata Cancellation

The termination of a contract with premium charge being adjusted in proportion to the exact time the protection has been in force. All unearned premium is returned to the insured.

Subrogation

The transfer to the insurance company of the insured's right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.

Misrepresentation

The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges, or estimated future dividends of any policy.

assigned risk

There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a Casualty company must agree to participate in the Assigned Risk Pool and take its turn providing Auto insurance to high-risk drivers.

Personal Lines Insurance

Type of coverage available to individuals and families for non-business risks.

Garagekeepers Liability

a coverage that is part of the garage policy that covers a garage risk's legal liability for customers' autos in the care, custody, or control of the garage

claim

a demand made by the insured to cover a loss protected by the insurance policy

Actual Cash Value (ACV)

a method of property valuation that is based on the property's current replacement value minus depreciation

Unoccupied

a property that has contents or furnishings in it but that is not being used or lived in

vacant

a property that has no contents, furnishings, or occupants

binder

a temporary contract that puts insurance coverage in effect before the actual policy is issued

Property Insurance

a type of insurance that covers losses of physical property or the loss of its ability to produce income

Vicarious Liability

a type of liability in which one person is responsible for the acts of another

Tort

a wrongful act or a violation of someone's rights that leads to legal liability

Warranty

an absolutely true statement that, if breached, may void an insurance contract

Unfair Trade Practice

any fraudulent, deceptive, or dishonest business practice that is prohibited by statutes and regulations

Negligence

failure to use the care that a reasonable, prudent person would under similar circumstances

Surplus Lines

insurance for which there is no readily available admitted market and which is marketed through nonadmitted insurers who specialize in offering insurance to the high risk market on an unregulated basis

Concurrent Causation

multiple events leading to one loss

Pro Rata

proportional distribution of shares of the loss for each insurance policy written on a property

Split Limits

separately stated limits of liability for different coverages, which may be started on a per person, per occurrence, per policy period basis, or can be divided between bodily injury and property damage

aggregate limit

the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims made or the number of accidents that may occur

Policyowner

the person entitled to exercise the rights and privileges in the policy