glossary

What is an aleatory contract?

A contract in which the participating parties agree to exchange unequal amounts.

What is 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.

What is considered an auto in insurance?

A land motor vehicle, trailer, or semi-trailer designed for use on public roads, including attached machinery or equipment.

What is arbitration?

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

What is a bailee?

A person or entity that has possession of personal property entrusted to them by the owner.

What is 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.

What is additional coverage?

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

What is blanket insurance?

A single policy that covers multiple properties or locations.

What is a binder in insurance?

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

What is absolute liability?

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

Fiduciary

Agent handling insurer's funds in trust.

Exclusive or Captive Agent

Agent representing one company.

Express Authority

Agent's authority from written contract.

What is coinsurance?

Agreement for both parties to pay a portion of potential loss.

What is a Conditional Contract?

Agreement with specific duties and rules.

What is a death benefit?

Amount payable upon the death of the insured.

What is an appraisal?

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

What is a controlled business?

An entity that writes business on specific individuals.

What is an agent?

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

What is an admitted insurer?

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

What is an alien insurer?

An insurance company incorporated outside the United States.

What is an 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.

What is an accident?

An unplanned, unforeseen event which occurs suddenly and at a specific place.

What is included in the declarations section of an insurance policy?

Basic underwriting information and supplemental representations.

Exclusions

Causes of loss not covered by policy.

Who is the Commissioner?

Chief executive of state insurance department.

What is a hazard?

Circumstance increasing likelihood of loss.

Indemnity

Compensation for loss or damage.

Hazard

Condition that increases likelihood of loss.

Functional Replacement Cost

Cost to replace with modern construction/equipment.

General Liability Insurance

Coverage for third-party bodily injury and property damage.

What is Comprehensive Coverage?

Covers losses from fire, theft, vandalism, etc.

What is avoidance as a method of dealing with risk?

Deliberately keeping away from the risk.

What is a claim?

Demand for coverage of a loss.

What is a cease and desist order?

Demand to stop violating a provision.

What is a certificate of authority?

Document authorizing a company to conduct business.

What is moral hazard?

Effect of reputation, character, etc. on insurability.

What is a Contract?

Enforceable agreement between parties.

What is economic loss?

Estimated total cost of an accident, including insured and uninsured expenses.

What is Consideration in a contract?

Exchange of value for transfer of risk.

Gross Negligence

Extreme carelessness or recklessness.

What are Components?

Factors that determine insurance rates.

What is burglary?

Forced entry into premises with felonious intent.

What are Conditions in insurance?

General rules or procedures in a policy.

Who is a director in the insurance industry?

Head of the state department of insurance.

What is disclosure in insurance?

Identifying the producer or representative on policy solicitation.

First Named Insured

Individual listed first on policy.

Who are 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.

Foreign Insurer

Insurance company from another state.

What is a domestic insurer?

Insurance company incorporated in the state.

Nonadmitted Insurer

Insurance company without Certificate of Authority

Fraternal Benefit Society

Insurance for affiliated organization members.

What is Building and Personal Property Coverage Form?

Insurance for buildings and/or their contents.

What is Builder's Risk Coverage Form?

Insurance for buildings under construction.

What is casualty insurance?

Insurance for injury or property damage to others.

Notice of Claim

Insured's duty to provide reasonable notice of loss

What is a deposit premium audit?

Insurer's audit of insured's books to ensure adequate premium collection.

Fraud

Intentional misrepresentation for gain.

What is a certificate of insurance?

Legal document indicating an insurance policy has been issued.

What is estoppel?

Legal impediment to denying a fact or restoring a waived right.

What is bodily injury liability?

Legal liability for physical harm caused by insured's actions.

What is depreciation?

Lessening of value of property due to age and wear.

What is the domicile of an insurer?

Location of incorporation and legal ability to write business.

What does a blanket bond cover?

Losses caused by dishonest employees.

What is concurrent causation?

Multiple events causing a single loss.

Nonconcurrency

Other insurance on same risk, different coverage basis

Grace Period

Period after due date to pay premium without penalty.

What is a Consultant?

Person who offers advice regarding insurance.

What are direct losses?

Physical damage to property as a result of a specific peril.

What is disability?

Physical or mental impairment resulting from injury or sickness.

Excess Policy

Policy that pays after primary policy's limit.

What is a deductible?

Portion of the loss paid by the insured before claim benefits.

Experience Rating

Premium based on past loss experience.

What is class rating?

Pricing based on applicants' shared characteristics.

What is an endorsement in insurance?

Printed addendum used to change policy terms, conditions, or coverages.

Extensions of Coverage

Provision extending major coverage.

What is gross negligence?

Reckless behavior disregarding safety of others.

What is a boycott?

Refusing to do business until certain conditions are met.

What is combined single limit?

Single dollar limit for bodily injury and property damage.

FAIR Plan

State-run program for high-risk areas.

What are Consumer Reports?

Statements about a consumer's credit, reputation, etc.

Flood

Temporary inundation of dry land from water.

What is cancellation?

Termination of an insurance policy before expiration.

Nonrenewal

Termination of policy on anniversary or renewal date

What is abandonment?

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

What does it mean for insurance contracts to be aleatory?

The amount the insured pays in premiums is unequal to the amount the insurer pays in the event of a loss.

What is apparent authority?

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

What is an 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.

Who is the beneficiary in an insurance policy?

The person who receives the proceeds from the policy.

What is 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.

What is 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.

What is an assignment in insurance?

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

What is Commercial Lines?

Type of insurance for businesses.

What is defamation?

Unfair trade practice of making injurious statements about another.

Exposure

Unit of measure for insurance rates.

What is Common Law?

Unwritten law based on past judicial decisions.

What is coercion?

Using force to persuade someone to buy insurance.

When are assignments of policies valid in property and casualty insurance?

Usually valid only with the prior written consent of the insurer.

What is Concealment?

Withholding of known facts that can void a contract.

What is a Complaint?

Written statement of a liability claim.