Hondros

Fire Insurance

1. Contract that indemnifies an insured for loss caused by the destruction of the insured property resulting from fire. 2. The field of insurance that provides policies on the insured property for a variety of perils, including fire.

Co-insurance

1. In Property Insurance, a clause under which the insured shares in losses to the extent that the insured is under-insured at the time of the loss. 2. In Health Insurance, a provision that the insured and insurance company will share covered losses in agreed proportion. In Health Insurance, the preferred term is percentage participation.

Expediting Expenses

A Boiler and Machinery coverage that covers the cost of temporary repairs and the costs of speeding up permanent repairs (e.g. overtime, express transportation charges).

Errors and Omissions

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

Extra Expense Insurance

A Time Element coverage for additional expenses incurred by the insured's business to continue operations following a direct loss by a peril insured against.

Contingent Business Income

A Time Element coverage that protects the insured against indirect loss that results because of a direct loss to a supplier, buyer, or leader location.

Instrumentalities of Transportation and Communication

A category of the Nationwide Definition that includes several different classes of Inland Marine, including bridges, tunnels, piplines, etc.

Imports and Exports

A category of the inland and Ocean Marine Nationwide Definition, which is made up of risks eligible for Marine Insurance.

Consideration

A characteristic of a legal contract - the thing of value exchanged for the performance promised in the contract. In insurance, the applicant's answers and the policy premium paid constitute the consideration.

Fidelity Bond

A class of bonds that guarantees an employee's honest discharge of duty.

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).

Admitted Company

A company that meets the state Insurance Department's standards and is authorized by the director to do business in the state.

Inherent Vice

A condition or defect that exists within property from the beginning. A tendency of the property itself. An example of inherent vice is the tendency of milk to sour. Insurance policies usually exclude inherent vice.

Insurance Policy

A contract, legal document, which establishes the terms of agreement between the insurer and insured.

Hold Harmless Agreement

A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts such as leases, sidetrack agreements, and easements. For example, a typical lease may provide that the lessee must "hold hharmless" the lessor for any liability from accidents arising out of the premises.

Additional Living Expenses

A coverage designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This indirect loss must be the result of direct loss by a covered peril.

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.

Garage Keepers Liability

A coverage that is part of the Garage policy. Covers a garage's risk of legal liability for customers' autos in the care, custody, or control of the garage. At the insured's option, can also apply without regard to fault, for an additional premium.

Endorsement

A document, agreed to by both parties, that is attached to the policy and which modifies or changes the original policy in some way.

Fraud

A false statement intended to deceive the insurer and induce it to part with something of value or to surrender a legal right. May void a policy.

Federal Crime Insurance

A federally administered program that makes Crime Insurance available and affordable to those who might otherwise have found coverage difficult to obtain.

Inland Marine Insurance

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

Contract

A legal agreement between two parties promising a certain performance in exchange for a certain consideration.

Commercial Package Policy

A multi-peril, multi-line policy that provides a broad spectrum of Property and Casualty coverages for businesses. In addition to required Basica Property and Liability Insurance, the insured may add additional marine, Boiler and Machinery, Glass, Crime, Business Auto, or Farm coverages.

Fiduciary

A person who occupies a position of special trust and confidence. For example, one handling or supervising the affairs or funds of another.

Additional Insured

A person, firm, or corporation other than the named insured on a policy, or a lender named in a mortgage clause, who is protected against loss by the terms of the policy.

Garage Policy

A policy that provides coverage for garage businesses (dealers, service stations, garages, parking lots, etc.) Includes coverage for liability, physical damage, and garage keepers' losses arising out of owned, non-owned, and hired autos.

Declarations Page (Dec Sheet)

A portion of the insurance contract that contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.

Application

A questionnaire that is filled out by an agent and the prospect seeking insurance. The form contains rating and underwriting information. The applicant is expected to make representations by answering questions to the best of the applicant's knowledge (truthfully).

Insurance

A social device that protects people against certain types of financial losses by transferring pure risk from individuals to a group. Insurance involves the pooling of a large number of individual risks. Funds to cover individual losses are raised by collecting small amounts of money (premiums) from a broad base of buyers.

Extended Coverage Endorsement (ECE)

A specific endorsement, attached to a standard Fire policy, usually providing coverage for windstorm, hail, explosion, riot, civil commotion, aircraft, vehicular damage, volcanic eruption, and smoke damage.

Competitive State Fund

A state fund writing Workers' Compensation insurance in competition with private insurers.

Appurtenant Structure

A structure belonging to the insured structure, such as a tool shed. Appurtenant structures are provided for in the Homeowners policy and Other Dwelling policies. This coverage is often called Other Structures or Out Buildings.

Accident

A sudden and unexpected event occurring at a specific time and place.

Audit

A survey of the financial records of the insured conducted to determine exposures, limits, etc., which are needed to calculate the premium. The initial premium is only a deposit.

Casualty Insurance

A type of insurance that is primarily concerned with losses caused by injury to persons and legal liability imposed upon the insured for such injury or damage to property of others.

Aggregate Limit

A type of policy limit found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.

Jettison

A voluntary action to rid the ship of cargo in order to prevent further damage or peril.

Insurability

Acceptability of an applicant for insurance to the insurance company.

Improvements and Betterments

Additions or changes made by an insured to a building that may or may not be owned by the insured. Cost arising from these changes may enhance values and thereby require special insurance consideration.

Agent

An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance cotracts on its behalf.

General Agent (GA)

An individual appointed by an insurer to administer its business in a given territory. A GA is responsible for building the agency and service force. Compensation is on a commission basis, although there may be additional expense allowances.

Law of Large Numbers

An insurance company bases its rates on a homogeneous group. Risks are not usually considered insurable unless the insurer has a large enough base of previous loss experience to be able to accurately project future losses. It is the Law of Large Numbers that makes accurate predictions of similar risks possible.

Domestic Insurance Company

An insurance company formed under the laws of the state in which the insurance is written.

Alien Company

An insurance company incorporated in a country other than the United States.

Direct Writer

An insurance company that sells its policies through licensed agents who represent the insurer exclusively, rather than through independent local agents, who represent several insurance companies.

Bond

An obligation of the insurance company to protect one against financial loss caused by the acts of others.

ISO (Insurance Services Office)

An organization, comprised 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.

Compulsory Insurance

Any form of insurance that is required by law. In many states, for example, Automobile Bodily Injury Liability Insurance is compulsory for all automobile owners.

Hazard

Anything that increases the seriousness of a loss or increases the likelihood that a loss will occur (risk) due to a peril. For example, improperly stored combustible materials, worn tires, intentional abuse to insured property, unsafe structural changes.

Burglary

As it is defined in Crime Insurance policies, the unlawful taking of property by forced entry into, or exit from the premises, while the premises are closed for business. There must be visible evidence of forced entry or exit.

Binders

Binders and other temporary insurance contracts may be made orally or in writing. Each binder is deemed to include all usual terms of the policy for which it was given, plus endorsements. Life or Disability Insurance utilizes conditional receipts instead of binders.

Liability

Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary (money-related) sense.

Exclusions

Causes, conditions, or property listed in the policy that are not covered and for which no benefits are payable.

Fire

Combustion, sufficient to produce a spark, flame, or glow, that is hostile (not in a place where it is intended to be). A friendly fire is one in your fireplace.

Insurance Commissioner

Common title for head of state department of insurance (called "director" in some states.)

Employers Liability Coverage

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

Depreciation

Decrease in the value of property over a period of time due to use, wear and tear, and obsolescence.

Comparative Negligence

Doctrine that a defendant is liable only for the amount of damages allocated to that defendant in direct proportion to the defendant's percentage of fault (if not 51% or more at fault, defendant is not held liable.)

FAIR Plan

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.

Blanket Position Bond

Fidelity bond that specifies a single limit of liability aplicalbe ot each employee involved in a loss.

Business

Full-time or part-time work with more than $2,000 annual income. Business does not include volunteer activities.

Appraisal

If the insured and insurer cannot agree on the amount of loss, either may demand an appraisal. If demanded, each will select an appraiser who, jointly, will select an umpire. The appraisers will appraise the loss and either agree or submit differences to the umpire. Agreement by any two of the three will be binding. Each party will pay its own appraiser and share equally the expenses of the appraisal and the umpire.

Custodian

In Crime Insurance, a custodian is the insured or a regular employee or partner of the insured who has care of control of property within the premises. Does not include watchman, porter, or janitor.

Hull Insurance

In Ocean Marine and Aviation Insurance, insurance against physical damage to a plan or ship.

Consequential Loss

Indurect losses that occur as a "consequence" of a direct loss. Includes Time Element coverages, such as coverage for rental value.

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.

Indemnity

Insurance is designed to restore the policyowner to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow someone to profit from a loss situation.

Bailee's Customer's Policy

Insurance obtained by a bailee, to cover loss or damage to customers' property in the bailee's custody, without regard to liability.

All Risk Insurance

Insurance protecting the insured from loss arising from any peril other than those specifically excluded by name. This contrasts with Named Peril Insurance, which names the peril or perils insured against.

Boiler and Machinery Policy

Insurance that covers the insured against loss (Liability and Physical Damage) arising out of the use of steam boilers or other machinery. May be written as a separate policy or as part of a Commercial Package Policy.

Contingent Liability

Liability that an insured person or business incurs because of the actions of others (family or employees). Also called Vicarious Liability.

Absolute Liability

Liability that arises from an extremely dangerous situation. Absolute liability is often found in cases involving explosives. Also known as "strict" liability. For example, you are absolutely liable if you keep a wild animal as a pet.

Direct Loss

Loss that is a direct result of a peril, such as fire.

Indirect Loss

Loss that is a result or consequence of a direct loss.

Comprehensive Personal Liability

Non-business liability exposure of individuals who are insured under this policy. The most common personal liability exposures arise out of the residence premises and activities of individuals and family members. Comprehensive personal liability coverage first became available as a separate policy. Eventually it was incorporated into Homeowners policies.

Bailee

One who has temporary custody of property belonging to another (e.g., a dry cleaner).

Broker

One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions. By law, the broker may also be licensed as an agent.

Allied Lines

Property coverages that are closely associated with and frequently sold with Fire Insurance - Dwelling Building and Contents form, Earthquake Insurance, sprinkler leakage, etc.

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).

Contractual Liability

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

Employers Non-Ownership Liability

Provides coverage to an employer for liability arising out of an employee's use of his own auto in the employer's business. May be included under a Business Auto Policy of added to a Commercial General Liability.

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.

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.

Cancellation

Termination of insurance contract in force by voluntary act of the insurance company or insured, affected in accordance with provisions in the contract or by mutual agreement.

Earned Premium

That portion of the premium for which policy protection has already been given during the now expired portion of the policy term.

Actual Cash Value (ACV)

The cost to replace a property item at the item of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (replacement cost minus depreciation).

Effective Date

The date on which an insurance policy or bond goes into effect and from which protection is furnished.

Insurer

The inssurance company assuming risk and agreeing to pay claims or provide services.

Experience

The loss record of an insured, a class of coverage, or an insurance company.

Insured

The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service. For Property Insurance, the insured parties include the insured, any resident of the insured's household who are relatives, as well as other persons under the age 21 who are in the insured's regular care. Insured also includes full-time students away at schoo, up to age 24.

Conditions

The portion of an insurance contract that sets forth the rights and duties of the insured and the insurance company.

Dividend

The return of part of the premium paid for a participating policy.

Insuring Agreement

The section of an insurance policy that states which losses will be indemnified, what property is covered, and which perils are insured against.

Countersignature

The signature of a licensed agent, which, in most states, must appear on the policy to validate the contract.

Concealment

The withholding of a material fact from the insurance company. May void the 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. Also known as the "Auto Insurance Plan."

Bodily Injury

Usually defined to include bodily harm, sickness, disease, including required care, loss of services, and resulting death.

Deductible

Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

Insured Location

Your residence premises, any part of a premises where an insured is temporarily residing, vacant land (other than farmland) owned by an insured, or land owned by an insured on which a one-, two-, three-, or four-family dwelling is being built as a residence for an insured. Cemetery plots are also considered to be an insured location.