Abandonment
the abdication of insured property into the hands of another, or into the possession of no one in particular
Absolute Liability
Liability that arises from an extremely dangerous situation. 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.
Accident
an unplanned, unforseen event which occurs suddenly and at a specific place
Actual Cash Value
the required amount to pay damages 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 a specific loss expense without an increase in premium
Additional Insureds
individuals or business that are not named as insured on the decleration page, butr are protected by the policy, usually in regard to a specific interest
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 insurer to which a state insurance department has granted a license to do business within that state.
Adverse Selection
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
Agent
an individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer
Aggregate Limit
the maximum amount an insurer will pay for all covered losses during the covered policy period
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 participating parties exchange unequal amounts. 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 U.S.
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 assesment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid
Arbitration
A process, agreed to by parties to a dispute in lieu of going to court, by which a neutral person or body makes a binding decision
Assignment
the transfer of legal right or interest in an insurance policy, in P&C ususally only valid with prior written consent of the insurer
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.
Auto
a land motor vehicle, trailer or semi-trailer designed for use on public roads
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
One who holds the personal property of another for a specific purpose.
Beneficiary
the one who recieves the proceeds from an insurance policy
Binder
A temporary insurance contract that forms an oral or wirtten agreement between the insurance company and the customer.
Blanket Bond
a type of bond that covers losses caused by dishonest employees
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.
Bodily Injury Liability
Insurance that protects a driver from claims resulting from injuries or deaths for which the insured is at fault
Boycott
An unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.
Builder's Risk Coverage Form
This coverage form provides coverage for buildings that are under construction. Can also be used to cover a building while additions and alterations are being made to the structure.
Building and Personal Property Coverage Form
A commercial property form that covers buildings, and/or their contents.
Burglary
entering a building unlawfully with intent to commit a felony or to steal valuable property
Cancellation
the termination of an in-force insurance policy by either the insurer or the insured prior to the expiration date shown on the policy
Casualty Insurance
A type of insurance that is primarily concerned with the legal liability for 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 an 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
A cost-sharing provision requires the insured to assume a portion of the cost of covered services.
Combined Single
This coverage type is 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
insurance coverages for businesses, commercial institutions, and professional organizations.
Commissioner
The chief executive and administrative officer of a state insurance department.
Common Law
Decisions and opinions of courts that are based on local customs and habits of an area within a particular country or state
Complaint
a written statement of a liability claim given by the claimant; a reason for a law suit
Components
factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits
Comprehensive Coverage
The portion of an insurance policy that protects an individual against automobile damages or losses other than collisions. It includes damages and losses due to fire, vandalism, or theft.
Concealment
the withholding of known facts, which if material, can void a contract
Conditional Contract
A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.
Conditions
the section of the policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy
Consideration
Anything of value given to induce entering into a contract; it may be money, personal services, payment of premiums, for return of coverage
Consultant
An individual who provides professional advice or services for a fee, regarding the benefits, advantages or disadvantages promised under a policy of insurance
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.
Contract
A binding agreement between two or more persons that is enforceable by law
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.
Concurrent Causation
multiple events leading to one loss
Death Benefit
The amount payable upon the death of the person whose life is insured.
Declarations
The who, what, where, when, how of the policy. Also includes premiums
Deductible
A set amount that the holder of an insurance policy must pay for each loss before the insurance company pays out.
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
Any decrease or loss in value caused by age, wear, or market conditions
Direct Losses
Physical damage to buildings and/or personal property as a result of direct consequence of a particular peril.
Director
the head of the state department of insurance
Disability
A mental or physical impairment that substantially limits one or more major life activities.
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 conducts business in the state of incorporation.
Domicile of Insurer
Insurer's location of incorporation and the legal ability to write business in a state.
Economic Loss
the estimated total cost of and accident, both insured and unisured
Endorsement
A document, agreed to by both parites, that is attached to the policy and modifies or chages the original policy in some way.
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 only represents one company and is compensated by commisions
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 apply to specific 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
the individual whose name appears first on the policy's declaration
Flood
An unusual accumulation of water that overflows from rivers, lakes and the ocean onto land that is not normally covered by water.
Foreign Insurer
An insurance company that is incorporated in another state.
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.
Fraud
A deception deliberately practiced in order to secure unfair or unlawful gain.
Functional Replacement Cost
The cost of replacing damaged property with similar property that performs the same function but might not be identical to the damaged property.
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 of a person's indifference concerning loss has on the rist to be insured, lack of respect for danger
Physical Hazard
hazard that arises from the physical characteristics of an individual, such as disablilty due to current circumstance or a condition present at birth
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
agents that sell insurance for multiple companies and work for themselves or other agents
Indirect Losses
losses resulting from a peril but not directly caused by it, business disruption, rent insurance, extra expenses
Inflation Gaurd
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 cost of unexpected losses to many individuals
Insurance Policy
a written contract between the insured and an insurance company that promises to pay for all or part of a loss
Insured
An individual who is covered by an insurer
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
The insurance company that provides planned protection against economic losses
Insuring Agreement
A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service.
Intentional Tort
any deliberate act that causes harm to another person
Interline Endorsement
a written amendment designed to eleminate redundancy and minimize the number of endersments in the policy
Judgment Rating
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 principal stating that the larger number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of a 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 a property
Limit of Liability
the maximum amount for which an insured is liable
Lloyd's Association
organizations that provide support facilities for underwriters or groups of idividuals 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
An insurance provision authorizing payment in the event of loss to a person or entity other than the named insured having an insurable interest in the covered property
Loss Ratio
a calculation used by insurance companies to relate income from loss expenses (incurred losses + loss adjusting expense) / earned premium =?
Loss Valuation
a factor in determining the premium charged and the amount of insurance required
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 loss
Misrepresentation
a false statement or lie that can render a contract void
Monoline Policy
a policy written separately as a single coverage
Mutual Assesment Insurer
a mutual insurance company with thre right to assess a policy holder's additional amounts of mremium to meet operational needs
Mutual Companies
insurance organizations that have no capital stock, but are owned by the policy holders
Mysterious Disappearance
a dissapearance of property tha cannot be explained as to the location, time or manner of the property loss
Named Insured
the individual(s) whose name appears on the policy's decleration
Named Peril
the cause of loss specifically covered by the insurance policy. no coverage for unlisted perils
Negligence
the failure to use the care that a reasonable prudent person would under the same circumstances
No benefit to bailee
a provision that includes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving isnured 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
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
Occurence
a broader definition of loss, which differs in an accident 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
Open Peril
term used in property insurance to describe the breadth of coverage provided under an insurance policy for that insures against "any risk of loss' that is not specifically excluded
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 or other acts
Personal lines insurance
type of coverage available to indiviuals and families for non-business risks
Policy Limits
the maximum amount and 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
Policyholder
a basic, fundamental insurance policy which pays first with respect to other outstanding policies
Policyowner
the person who is entitled to exercise the rights and priviliges 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 know as 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 the 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. only type of risk insurance companies are willing to accept
Rebating
any inducement offered in the sale of insurance products this 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 in consideration of a premium paid to it agrees to indemnify another insurance company for part or all of its liabilities from insurance policies it has issued
Replacement Cost
the cost to replace damaged goods with like kind and quality at current price without any deduction for depreciation
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 self-rating plan under which the actual losses during the policy period determine the final premium
Right of Salvage
a provision in property insurance policy requiring that after a payment of total loss to insured property, the insured must transfer the title or ownership to the property of the insurer
Risk
uncertainty as to the outcome of a n event when two or more possibilities exist
Risk, Pure
the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain
Risk, Speculative
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.
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
Speculative Risk
the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain
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
the written law as enacted by legislative body, which generally takes precedence in cases where both common law and statute law apply
Stock Companies
companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company
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
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
any act of stealing or removing property form its rightful owner, encompasses both burglary and robbery
Third-Party Provisions
insurance provision that address the rights of someone other than the policy owner to have a secured financial interest in the insured property
Tort
a wrongful act or the violation of someone's rights that leads to legal liability, intentional and unintentional
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 the liability, and excess amount of insurance above the primary policy
Unauthorized Insurer
an insurance company that has not applied, or has applied and been denied a certificate of authority
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 lone party to contractual obligations after the premium is paid
Underinsured Motorist Coverage
auto coverage under which an insurer will pay up to limits if the liable driver's limits are exhausted and cannot pay the full amount for which they are liable
Uninsured Motorist Coverage
coverage that allows to collect sums under which another driver would be liable to pay resulting from an accident when no coverage is carried
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 not being 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 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 because of its rarity or uniqueness, no regard to actual value or depreciation
Vicarious Liability
a type of liability in which one person is responsible for the acts of another; employers and employees parents and 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
benefits required by state law to be paid to an employee by an employer in the case of injury, disability, or death as the result fo an on-the-job hazard