Glossary
Hazard
A circumstance that increases the likelihood of a loss
Building and Person Property Coverage Form
A commercial property form that covers buildings and/or their contents
Builder's Risk Coverage Form
A commercial property form that covers buildings under construction
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
Insurance Policy
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events
Aleatory
A contract in which the participating parties agree to exchange unequal amounts. Insurance contracts are __________ in that the amount the insured will pay in premiums is unequal to the amount the insurer will pay in the event of 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.
Inflation Guard
A coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually
Insured Contract
A definition on liability form that describes the types of contracts in which liability is assumed by the insured and included for coverage in the policy
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 type of document
Flood
A general and temporary condition of partial or complete inundation of normally dry land areas from overflow of inland or tidal waters or from the unusual and rapid accumulation or runoff of surface waters from any source
Auto
A land motor vehicle, trailer, or semi-trailer designed for use on public roads, including attached machinery or equipment
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 (Ex. If a person wanted to avoid the risk of being killed in an airplane crash, they 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 (Ex. a TV repair person that has possession of a customer's TV would be considered the _________)
Consultant
A person who, for a fee, offers any advice, counsel, opinion, or service regarding the benefits, advantages, or disadvantages promised under a policy of insurance
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 a fair valuation of 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 employess
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
Comprehensive Coverage
AKA "Other Than Collision" coverage, it covers losses by fire, theft, vandalism, falling objects, etc.
Independent Agents
Agents that sell the insurance products of several companies and work for themselves or other agents
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 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
Insurer
An entity that indemnifies against losses, provides benefits, or renders services (AKA the insurance company)
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 the 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 US
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/she agrees to certain conditions
Accident
An unplanned, unforeseen event which occurs suddenly and at a specific place
Common Law
An unwritten body of law based on past judicial decisions as well as usages and customs
Insurable 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
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
Cause 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
Components
Factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits
FAIR Plan
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 (Ex. Landlord may require to be listed as this)
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 Losses
Losses resulting from a peril, but not directly caused by it. Indirect losses may include business disruption, rent insurance, extra expenses, and other consequences that occur over time
Arbitration
Method of claim settlement used when the insured and insurer cannot agree upon the amount of loss
Experience Rating
Method of determining the premium based on the insured's own past loss experience
Concurrent Causation
Multiple events leading to one loss
Direct Losses
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
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 grated 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 _____________ on the part of the insured is the representations made in the application and the payment of the premium; The _____________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 of 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
Depreciation
The lessening of value of real and personal property due to age and wear & tear
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
Insured
The person or organization that is protected by insurance; the party to be indemnified
Beneficiaries
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 (ACV)
The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation Replacement cost - 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. In property and casualty insurance, assignments of policies are usually valid only with the prior written consent of the insurer
Abandonment
The transfer of insured property into the hands of another, or into the possession of no one in particular
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