Insurance terms

hazard

A circumstance that increases the likelihood of a loss.

Builders Risk Coverage Form

A commercial property form that covers buildings under construction.

Building and personal property coverage form

A commercial property form that covers buildings, and/or their contents.

Deposit Premium Audit

A condition that allows the insurer to audit the insured's books or records at the end of the policy term to make sure adequate premium has been collected for the exposure.

aleatory

A contract in which the participating parties agree to exchange unequal amounts. Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount the insurer will pay in the event of a loss.

Adhesion

A contract offered on a "take-it-or-leave-it" basis by an insurer, in which the insured's only option is to accept or reject the contract. Any ambiguities in the contract will be settled in favor of the insured.

Depreciation

A decrease or loss in value

Insured Contract

A definition on liability forms that describes the types of contracts in which liability is assumed by the insured and included for coverage in the policy. Examples of insured contracts are leases of premises, elevator maintenance agreements, easement agreements, and other agreements related to the insured's business.

claim

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

cease and desist order

A demand of a person to stop committing an action that is in violation of a provision.

Certificate of Authority

A document that authorizes a company to start conducting business and specifies the kind(s) of insurance a company can transact. It is illegal for an insurance company to transact insurance without this certificate.

auto

A land motor vehicle, trailer or semi-trailer designed for use on public roads, including attached machinery or equipment; auto does not include mobile equipment.

Certificate of Insurance

A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided.

Estoppel

A legal impediment to denying a fact or restoring a right that has been previously waived.

Fraternal Benefit Society

A life or health insurance company formed to provide insurance for members of an affiliated lodge, religious, or fraternal organization with a representative form of government.

Avoidance

A method of dealing with risk by deliberately keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an airplane crash, he/she might choose never to fly in a plane).

Bailee

A person or entity that has possession of personal property entrusted to him/her by the owner. For example, a television repair person that has possession of a customer's television would be a bailee.

disability

A physical or mental impairment, either congenital or resulting from an injury or sickness.

Excess Policy

A policy that only pays for loss after the primary policy has paid its limit.

endorsement

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

Agreed Value

A property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written.

Additional coverage

A provision in an insurance policy that allows for more coverage for specific loss expense without increase in premium.

Extensions of Coverage

A provision in some property policies which allows the extension of a major coverage to certain types of loss to property not specifically insured.

Combined Single

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 provides coverage for one or more classes of property at multiple locations.

binder

A temporary contract that puts an insurance policy into force before the premium has been paid.

Blanket bond

A type of bond that covers losses caused by dishonest employees.

Hazard, Physical

A type of hazard that arises from the physical characteristics of an individual, such as a physical disability due to either current circumstance or a condition present at birth.

Casualty Insurance

A type of insurance that covers losses caused by injury to persons or damage to the property of others.

Absolute Liability

A type of liability that occurs due to extremely dangerous operations, such as the use of explosives or working at extreme heights.

exposure

A unit of measure used to determine rates charged for insurance coverage.

complaint

A written statement of a liability claim given by the claimant; a reason for a lawsuit.

Independent agents

Agents that sell the insurance products of several companies and work for themselves or other agents.

comprehensive coverage

Also known as Other Than Collision coverage, it covers losses by fire, theft, vandalism, falling objects, etc.

disclosure

An act of identifying the name of the producer, representative or firm, limited insurance representative, or temporary insurance producer on any policy solicitation.

Exclusive or Captive Agent

An agent who represents only one company and is compensated by commissions.

Fiduciary

An agent/broker who handles insurer's funds in a trust capacity.

Coinsurance

An agreement between an insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses.

contract

An agreement between two or more parties that is enforceable in court

appraisal

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

Controlled Business

An entity that obtains and possesses a license solely for the purpose of writing business on the owner, immediate family, relatives, employer and employees.

agent

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

Admitted Insurer

An insurance company authorized and licensed to transact business in a particular state.

Authorized Insurer

An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

Foreign Insurer

An insurance company that is incorporated in another state.

Domestic Insurer

An insurance company that is incorporated in the state.

Alien Insurer

An insurance company that is incorporated outside the United States.

coercion

An unfair trade practice in which an insurer uses physical or mental force to persuade an applicant to buy insurance.

Defamation

An unfair trade practice in which one agent or insurer makes an injurious statement about another with the intent of harming the person's or company's reputation.

Boycott

An unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.

accident

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

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

Exclusions

Causes of loss, exposures, conditions, etc. listed in the policy for which the benefits will not be paid.

indemnity

Compensation to the insured that restores them to the same financial position that they enjoyed prior to the loss.

FAIR plans (Fair Access to Insurance Requirements)

Fair Access to Insurance Requirements plan is a state-run program that makes insurance obtainable to those in high risk areas who have been unable to acquire insurance through other channels.

Additional insureds

Individuals or business that are not named as insured on the declaration page, but are protected by the policy, usually in regard to a specific interest.

Domicile of Insurer

Insurer's location of incorporation and the legal ability to write business in a state.

fraud

Intentional misrepresentation or deceit with the intent to induce a person to part with something of value.

bodily injury liability

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

Indirect Loss

Losses resulting in a peril, but not directly caused by it.

Arbitration

Method of claim settlement used when the insured and insurer cannot agree upon the amount of the loss.

Experience Rating

Method of determining the premium based on the insured's own past loss experience.

Direct loss

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

gross negligence

Reckless behavior that shows disregard for the safety or lives of others.

Abandonment

The abdication of insured property into the hands of another, or into the possession of no one in particular.

Death Benefit

The amount payable upon the death of the person whose life is insured.

Apparent Authority

The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Express Authority

The authority granted to an agent by means of the agent's written contract.

Consideration

The binding force in a contract that requires something of value to be exchanged for the transfer of risk. The consideration on the part of the insured is the representations made in the application and the payment of premium; the consideration on the part of the insurer is the promise to pay in the event of loss.

Commissioner (Superintendent, Director)

The chief executive and administrative officer of a state insurance department.

Functional Replacement Cost

The cost to replace damaged property with less expensive and more modern construction or equipment.

Hazard, Morale

The effect a person's indifference concerning loss has on the risk to be insured.

Hazard, Moral

The effect of a person's reputation, character, living habits, etc. on his/her insurability.

economic loss

The estimated total cost (both insured and uninsured) of an accident.

burglary

The forced entry into another's premises with felonious intent.

Director (Commissioner, Superintendent)

The head of the state department of insurance.

First Named Insured

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

Aggregate Limit

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

beneficiary

The person who receives the proceeds from the insurance policy

Deductible

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

Class Rating

The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.

Actual Cash Value

The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation.

Declarations

The section of an insurance policy containing 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.

Conditions

The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.

Adverse Selection

The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.

cancellation

The termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy.

assignment

The transfer of a legal right or interest in an insurance policy.

insurance

The transfer of the possibility of a loss (risk) to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Concealment

The withholding of known facts which, if material, can void a contract.

Commercial Lines

Type of insurance that pertains to business, mercantile or manufacturing establishments.

Consumer Reports

Written and /or oral statements regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Inflation guard

a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually

consultant

a person who provides expert advice professionally

insurance policy

a written contract between the insured and an insurance company that promises to pay for all or part of a loss

flood

an overflowing of a large amount of water beyond its normal confines, especially over what is normally dry land.

Common Law

an unwritten law made by a judge that has developed over centuries from those generally accepted ideas of right and wrong that have gained judicial recognition

Insurance interest

any interest an insured may have in property that is the subject of insurance, so that damage or destruction of that property would cause the insured financial loss

components

factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits

Concurrent Causation

multiple events leading to one loss

Insured

the person or business for which the insurer assumes the risk