Abandonment
The abdication of insured property into the hands of another, or into the possession of no one in particular.
Absolute Liability
A type of liability that occurs due to extremely dangerous operations, such as the use of explosives or working at extreme heights.
Accident
An unplanned, unforeseen event which occurs suddenly and at a specific place.
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.
Additional Coverage
A provision in an insurance policy that allows for more coverage for specific loss expense without increase in premium.
Additional Insureds
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.
Admitted Insurer
An insurance company authorized and licensed to transact business in a particular state.
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.
Agent
An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer.
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.
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.
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.
Alien Insurer
An insurance company that is incorporated outside the United States.
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.
Appraisal
An assessment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid.
Arbitration
Method of claim settlement used when the insured and insurer cannot agree upon the amount of the loss.
Assignment
An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
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.
Beneficiary
The person who receives the proceeds from the insurance policy.
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.
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.
Boycott
An unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.
A commercial property form that covers buildings under construction.
A commercial property form that covers buildings, and/or their contents.
Burglary
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.
Casualty Insurance
A type of insurance that covers losses caused by injury to persons or damage to the property of others.
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.
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.
Claim
A demand made by the insured to cover a loss protected by the insurance policy.
Class Rating
The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.
Coercion
An unfair trade practice in which an insurer uses physical or mental force to persuade an applicant to buy insurance.
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.
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.
Commercial Lines
Type of insurance that pertains to business, mercantile or manufacturing establishments.
The chief executive and administrative officer of a state insurance department.
Common Law
An unwritten body of law based on past judicial decisions as well as usages and customs.
Complaint
A written statement of a liability claim given by the claimant; a reason for a lawsuit.
Components
Factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits.
Comprehensive Coverage
Also known as Other Than Collision coverage, it covers losses by fire, theft, vandalism, falling objects, etc.
Concealment
The withholding of known facts which, if material, can void a contract.
Conditional Contract
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.
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 par
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.
Contract
An agreement between two or more parties enforceable by law.
Controlled Business
Concurrent Causation
Death Benefit
The amount payable upon the death of the person whose life is insured.
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.
Deductible
The portion of the loss that is to be paid by the insured before any claim benefits may be paid by the insurer.
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.
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.
Depreciation
The lessening of value of real and personal property due to age and wear and tear.
Direct Losses
Physical damage to buildings and/or personal property as a result of direct consequence of a particular peril.
Disability
A physical or mental impairment, either congenital or resulting from an injury or sickness.
Disclosure
An act of identifying the name of the producer, representative or firm, limited insurance representative, or temporary insurance producer on any policy solicitation.
Domestic Insurer
An insurance company that is incorporated in the state.
Domicile of Insurer
Insurer's location of incorporation and the legal ability to write business in a state.
Economic Loss
The estimated total cost (both insured and uninsured) of an accident.
Endorsement
Estoppel
A legal impediment to denying a fact or restoring a right that has been previously waived.
Excess Policy
A policy that only pays for loss after the primary policy has paid its limit.
Exclusions
Causes of loss, exposures, conditions, etc. listed in the policy for which the benefits will not be paid.
Exclusive or Captive Agent
An agent who represents only one company and is compensated by commissions.
Experience Rating
Method of determining the premium based on the insured's own past loss experience.
Exposure
A unit of measure used to determine rates charged for insurance coverage.
Express Authority
The authority granted to an agent by means of the agent's written contract.
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.
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.
Fiduciary
An agent/broker who handles insurer's funds in a trust capacity.
First Named Insured
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.
Foreign Insurer
An insurance company that is incorporated in another state.
Fraternal Benefit Society
Fraud
Intentional misrepresentation or deceit with the intent to induce a person to part with something of value.
Functional Replacement Cost
The cost to replace damaged property with less expensive and more modern construction or equipment.
Gross Negligence
Reckless behavior that shows disregard for the safety or lives of others.
Hazard
A circumstance that increases the likelihood of a loss.
Moral Hazard
The effect of a person's reputation, character, living habits, etc. on his/her insurability.
Morale Hazard
The effect a person's indifference concerning loss has on the risk to be insured.
Physical Hazard
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.
Indemnity
Compensation to the insured that restores them to the same financial position that they enjoyed prior to the loss.
Independent Agents
Indirect Losses
Inflation Guard
A coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually.
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.
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.
Insurance Policy
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events.
Insured
The person or organization that is protected by insurance; the party to be indemnified.
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 agr
Insurer
An entity that indemnifies against losses, provides benefits, or renders services (also known as the "company" or "insurance company").
Insuring Agreement
The section of an insurance policy containing the insurer's promise to pay, the description of coverage provided and perils insured against.
Intentional Tort
Any deliberate act that causes harm to another person.
Interline Endorsement
A written amendment designed to eliminate redundancy and minimize the number of endorsements in the policy.
An approach used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.
Law of Large Numbers
A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.
Legal Liability
A liability under the law that occurs when a person is responsible for injuries or damages to another due to negligence.
Liability
Responsibility under the law.
Liberalization
A property insurance clause that extends broader legislated or regulated coverage to current policies, as long as it does not result in a higher premium.
Lien
A charge, security or encumbrance on property.
Limit of Liability
The maximum amount for which an insurer is liable.
Lloyd's Associations
Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Loss Payable Clause
Loss Ratio
Loss Valuation
A factor in determining the premium charged and the amount of insurance required.
Market Value
Misrepresentation
A false statement or lie that can render the contract void.
Monoline Policy
A policy written separately as a single coverage.
Mutual Assessment Insurer
A mutual insurance company with the right to assess policyholder's additional amounts of premium to meet operational needs.
Mutual Companies
Insurance organizations that have no capital stock, but are owned by the policyholders.
Mysterious Disappearance
A disappearance of property that cannot be explained as to the location, time or the manner of property loss.
Named Insured
Named Peril
The cause of loss specifically covered by the insurance policy. No coverage is provided for unlisted perils.
Negligence
The failure to use the care that a reasonable, prudent person would under the same or similar circumstances.
No Benefit to the Bailee
A provision that excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee.
Nonadmitted Insurer
An insurance company that has not applied, or has applied and been denied a Certificate of Authority and may not transact insurance.
Nonconcurrency
A situation in which other insurance is written on the same risk, but not on the same coverage basis.
Nonrenewal
A termination of a policy by an insurer on the anniversary or renewal date.
Notice of Claim
A provision that spells out an insured's duty to provide the insurer with reasonable notice in the event of a loss.
Occurrence
A broader definition of loss, which differs from accident in that it includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.
Pair and Set Clause
A clause included in many property and inland marine policies, which provides that the insurer is not obligated to pay for the total value of a set of items if only one item has been lost, damaged or destroyed.
Partnership
A legal entity in which 2 or more persons agree to share the profits and losses of the business.
Passive
A description of an anti-theft device or system for autos which is activated automatically when the driver turns the ignition key to the off position and the key is removed.
Peril
The cause of a possible loss.
Personal Injury Liability
Legal responsibility for an injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts.
Personal Lines Insurance
Type of coverage available to individuals and families for non-business risks.
Policy Limits
The maximum amount an insured may collect, or for which an insured is protected under the terms of the policy.
Policy Period
A period of time a policy is in effect (also known as Policy Term).
Policyholder
The person in possession of an insurance policy; may or may not be the policyowner and/or insured.
Policyowner
The person who is entitled to exercise the rights and privileges in the policy. This person may or may not be the insured.
Premium
A periodic payment to the insurance company to keep the policy in force.
Primary Policy
A basic, fundamental insurance policy which pays first with respect to other outstanding policies.
Pro Rata
Proportional distribution of shares of the loss for each insurance policy written on a piece of property.
Producer
A person who acts on the behalf of the insurer to sell, negotiate, or effect insurance contracts; also known as an agent.
Proof of Loss
A sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid.
Property Damage Liability
Legal liability arising from physical damage to tangible property of others caused by the negligence of an insured.
Proximate Cause
An act or event that is the immediate or actual cause of a loss.
Pure Risk
Situations that can only result in a loss or no change; a gain is never possible. Pure risk is the only type insurance companies are willing to accept.
Rebating
Any inducement offered in the sale of insurance products that is not specified in the policy.
Reciprocal
Insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers.
Reduction
Lessening the possibility or severity of a loss.
Reinsurance
A form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued.
Replacement Cost
Representations
Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.
Retention
A method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured's account; the amount of responsibility assumed but not reinsured by the insurance company.
Retrospective Rating
A provision in property insurance policy requiring that after payment of a total loss to insured property, the insured must transfer the title (or ownership) to the property to the insurer.
Risk
Uncertainty as to the outcome of an event when two or more possibilities exist.
Speculative Risk
The uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain.
Robbery
The taking of property from another by using violence or the threat of violence.
Salvage
The amount of money realized from the sale of damaged merchandise or property. A salvage clause is found in ocean marine insurance and usually states that the rescuers of a ship are entitled to the salvage of the ship and cargo.
Settlement
The process by which an agreement is reached and a claim is resolved in liability insurance.
Severability of Interests
A provision that insurance applies separately to each insured in a policy, treating each individual as the only insured.
Sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
Specific Insurance
A property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
Split
Separately stated limits of liability for different coverages, which may be stated on a per person, per occurrence, per policy period basis, or can be divided between bodily injury and property damage.
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.
Statute Law
Stock Companies
Strict Liability
A liability that refers to damages caused by defective products even though the manufacturer's fault or negligence cannot be proven.
Subrogation
The acquisition by an insurer of an insured's rights against any third party for indemnification of loss or other payment, to the extent that the insurer pays the loss.
Superintendent (Commissioner, Director)
The head of the state department of insurance.
Surety Bond
A guarantee that debts and obligations will be carried out, and the benefits will be paid for losses caused by nonperformance.
Surplus Lines
Insurance for which there is no readily available, admitted market.
Theft
Tort
A wrongful act or the violation of someone's rights that leads to legal liability. Torts are classified as intentional or unintentional (referred to as negligence).
Transfer
A basic principle of insurance under which the risk of financial loss is assigned to another party.
Twisting
A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.
Umbrella Liability Policy
Coverage that provides extra protection against liability, and excess amount of insurance above the primary policy.
Unauthorized Insurer
Underwriter
A person who evaluates and classifies risks to accept or reject them on behalf of the insurer.
Underwriting
The process of reviewing, accepting or rejecting applications for insurance.
Unilateral Contract
A contract that legally binds only one party to contractual obligations after the premium is paid.
Coverage in an automobile insurance policy under which the insurer will pay costs up to specified limits for bodily injury, if the liable driver's policy limits are exhausted and he/she cannot pay the full amount for which he or she is liable.
Coverage that allows the named insured, resident relative(s) and passengers in a covered auto to collect sums another driver would be legally liable to pay for bodily injury resulting from an auto accident, providing the accident was caused by an uninsure
Unintentional Tort
The result of acting without proper care, generally referred to as negligence.
Unoccupied
A property that has contents or furnishings in it, but is not being used or lived in.
Utmost Good Faith
The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.
Vacant
A property that has no contents, furnishings, or occupants.
Valued Policy
A policy used when it is difficult to establish the actual cash value of insured property after a loss occurs because of its rarity or uniqueness. A valued policy provides for payment of the full policy amount in the event of a total loss without regard t
Vicarious Liability
A type of liability in which one person is responsible for the acts of another. For example, employers may be vicariously liable for the actions of their employees, and parents may be held responsible for negligent acts of their children.
Waiting Period
Time between the beginning of a disability and the start of disability insurance benefits.
Waiver
The voluntary abandonment of a known or legal right or advantage.
Warranty
A material stipulation in the policy that if breached may void coverage.
Workers Compensation
Reciprocity
Solvency
Fair Credit Reporting Act
Named peril
Named Peril
5 years
10 days
10 days
18 years old
2 years
60 days
5 days
90 days
15 months
15 days
30 days
15 days
15 days
30 days
30 days
20 days
30 days
30 days
6 years
10%
$500
$2,500
$10
$25
$2,000
$2,500
$5,000
Fiduciary Responsibility