Property and Casualty Insurance Terms and Related Consepts

loss payment formula

(Insurance carried / Insurance required) x loss amount

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.

market value

A seldom used method of valuing a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss.

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.

stated amount

An amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss.

moral hazard

Increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existence of insurance

strict liability

The legal responsibility for damage or injury even if you are not negligent

loss

The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.

certificate of insurance

Written evidence showing that an insurance policy or policies have been issued

insurance policy

a contract between a policy owner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

implied warranty

a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer's expectations

insurance

a transfer of risk of loss from an individual or a business entity to an insurance company. The cost of an insured loss is transferred over to the insurer and spread among other insureds

proximate cause

act or event considered a natural and reasonably for seeable cause of the damage or event that occurs and damages property or injuries a plaintiff

physical hazard

arising from the material, structural, or operational features of the risk

open peril

breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded

named peril

breadth of coverage provided under an insurance policy form that lists specific covered causes of loss

occurrence

broader definition of a loss accident because it includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damages to property that is not intended or expected

perils

causes of loss insured against in an insurance policy

general damages

compensate the injured person for pain and suffering, mental anguish, disfigurement, and other similar types of loss

deposit premium audit

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

hazard

conditions or situations that increase the probability of an insured loss happening

actual cash calculation

current replacement cost - depreciation = actual cash value

mysterious disappearance

disappearance of property without knowledge as to the location, time or how the property was lost

deducitble

dollar amount an insured must pay on a claim before the insurance policy coverage

deposit premium

estimated premium paid in advance at the time the policy is issued that may be adjusted based on actual exposures

loss valuation

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

negligence

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

punitive damage

form of punishment for extreme outrageous behavior, negligence or willful intent

absolute liability

imposed upon a person or company engaged in hazardous or potentially dangerous business who, by negligence or by an omission, causes harm or injury to another person or property

coinsurance clause

in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured policy

unoccupancy

insured structure in which no people have been living or working within the required period of time, but some property is stored

vacancy

insured structure in whihch no people have been living or working and no property has been stored for the period of time required based on the policy

subrogation

insurers legal right to seek damages from 3rd parties, after it has reimbursed the insured for the loss

limits of liability

insurers liability for payment as stated in an insurance policy

fair credit reporting act

law that protects consumers against the circulation of inaccurate or obsolete person financial information and to ensure that the consumer reporting agencies are fair and requirable in their treatment

indirect loss / consequential loss

losses considered a result of a direct loss

per person

maximum amount available for payment of bodily injury to a single person in an accident, regardless of the policy limit stated for BI claims

aggregate limit

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 occur

actual cash value

method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and becomes subject to wear and tear and obsolescence

speculative risk

opportunity for wither loss or gain. not insurable

direct loss

physical damage to buildings or property

specific insurance

property insurance policy that covers a specific kind of unit of property for a specific amount of insurance

insurance to value provision

provides a replacement cost settlement to the policy holder who carries adequate insurance, which means that the property is insured to the exact dollar amount or percentage of value.

depreciation

reduction in value, particularly due to wear and tear

split limits

separately stated limits of liability for different coverages

blanket insurance

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

pure risk

situations that can only result in a loss or no change. no opportunity for financial gain. insurable.

indemnity

sometimes referred to as reimbursement. provision in an insurance policy that states that in the event of loss, an insured is permitted to collect only the extent of the loss with no additional financial gain

special damages

specific out of pocket expenses for medical, miscellaneous expenses and loss of wages

law of large numbers

states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be. as the number of people in a risk pool increases, future losses become more predictable

per occurence

sublimit in a liability policy that puts a ceiling on the payment for all claims that arise from a single accident / occurance

accident

sudden, unplanned or unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended

exposure

susceptibility to risk

coinsurance penalties

the amount of insurance carried over the amount of insurance the insured should have had, multiplied by the loss, which equals the reduced payment for loss

insurer (principal)

the company who issues an insurance policy

replacement cost

the cost to replace damaged property with like kind and quality at todays price

salvage value

the estimated value of a fixed asset at the end of its useful life

premium

the money paid to the insurance company for the insurance policy

insurable interest

the person or property covered by an insurance policy

vicarious liabiltiy

transfer the liability from one person to another person who would probably have a greater ability to pay

risk

uncertainty or chance of a loss occurring