Accident
A sudden, unintended event which results in a loss
Occurrence
A continuous exposure to the harmful condition. In simple terms it includes the accident and everything that happens as a direct result.
Arbitration
Process where a disputed claim (an argument over whether the policy covers the loss) is decided by a neutral 3rd party called a referee.
Cancellation
Termination of an insurance policy before the expiration date.
Pro Rata Cancellation
Cancellation that refunds unused premium to the insured
Short Rate Cancellation
Cancellation where the insured incurs a financial penalty for cancelling before the contract expired.
Flat Rate Cancellation
Cancellation that is retroactive to the effective date of the policy.
EX: You buy a policy for a house and the sale falls through. Policy is cancelled as of when it started. "I don't owe you, you don't owe me.
Non-Renewal
Termination of the policy at the end of the policy period.
Proximate Cause
The primary cause of a loss.
Ex: This may not be the cause that occurs immediately before damage. Last cause could be a link in a chain connecting the event with the primary cause of the loss. A fire might cause water pipe to burst. Even though the loss i
Hostile Fire
Fire that burns outside of intended boundaries
Inherent Vice
Quality within property that causes damage to itself (ex: Rust, Defect, Rot, etc.)
Binder
Temporary proof of insurance that includes name of the company, amount of insurance, and perils covered.
Right of Salvage
Insurer's right to take possession of damaged property after the claim is paid. This is not the same as subrugation.
Concurrent Causation
when two perils cause loss, even if one peril is excluded (not covered) the insurer must still pay for the loss ("If there's an earthquake, pray for a fire")
Non-Concurrency
When two policies cover the same perils but do not have the same policy period. This can cause a gap in coverage.
Deductible / Retained Limit
Insured's portion of the loss
Bailee
Person or organization in which property is entrusted for servicing, repairs, storage (ex: Dry Cleaner, Auto Repair Shop, etc.)
Primary Insurance
Insurance policy that pays first in a loss.
Excess insurance
Insurance Policy that pays after primary insurance.
Unoccupancy (Unoccupied)
Property with contents but no occupants.
Vacancy (Vacant)
Property without contents or occupants.
Direct Loss
Direct damage to property (Fire, Smoke, Lightning, Water Damage)
Indirect Loss / Consequential Loss
Additional financial loss that occurs as a result of a direct loss. These are usually extra bills for living expenses you now have in addition to your normal monthly living expenses because of the loss, like hotel bills.
Named Perils
Policy that only provides coverage for perils named or listed. These can also be called specific perils or broad form perils.
Open Perils
Policy that provides coverage for any peril except those specifically excluded These can also be referred to as "All-risk.
Loss Valuation / Loss Settlement
Specifies which valuation method will apply in case of a loss
Replacement Cost (RCV)
The cost to replace property at current prices without depreciation
Actual Cash Value (ACV)
Cost to replace property at current prices with deprecation
Agreed Value
Insurer and insured agree to a specific value of particular property before coverage is written.
Stated Value
States value of a particular property on the declaration page, but provides for the insurer to pay the lesser of either the stated value or ACV at the time of the loss
Valued Policy
Policy that pays the full face value in the event of a total loss
Functional Replacement Cost
Cost to replace property with property that performs the same function. Usually used for old houses where original building materials are no longer available (or legal) Ex: Replacing what used to be horse-hair plaster with sheet-rock.)
Market Value
Price for a property where value fluctuates with the housing market. (Not considered when determining coverage, only replacement cost matters.)
Policy Period
Specifies the time period when coverage applies
Liberalization Clause
Insurer broadens coverage without any additional premiums or endorsements
Subrogation
The insured's own insurance company pays the claim instead of waiting for the at-fault's insurance company to pay for it, the insured then transfers the right of recovery to the insurer. This it NOT the same as right of salvage.
Duties in the Event of a Loss
Obligations of the insured in the event of a loss
Appraisal
Process when the insurer and the insured cannot agree on the dollar amount of a loss. It is determined by a neutral 3rd party called an Umpire.
Abandonment of Property
Specifies the insurer is not obligated to accept property abandoned by the insured.
Mortgage Clause
Specifies how policy protects mortgagee's financial interest
No Benefit to Bailee
No coverage applies if loss payment benefits a bailee
Named Insured
Person or organization designated on the declaration of a policy. The actual policyholder.
Insured
A person or organization protected by an insurance contract.
First Named Insured
Person or organization whose name appears first on the declaration.
Additional Insured
Person or organization other than insured who through endorsement is protected by the policy. (Finance Company, Leasing Company, or Mortgage Company)
Coinsurnace
A provision contained in property policy to encourage the insured to insure the home to replacement value.
DEADICE
Acronym for Elements of Policy Structure
Declarations, Exclusions, Additional Coverage, Definitions, Insuring Agreement, Conditions, Endorsements
Declarations
In policy structure, the who, what, when, where and How Much. Unique to the every policy.
Exclusions
Specifies things not covered
Additional Coverage
Coverages for incidental expenses that can occur with loss (debris removal, fire department service charge)
Definitions
Define and clarify policy language
Insuring Agreement
The insurance company's promise to indemnify the policyholder for a covered loss. Covered perils are listed here as well.
Conditions
States the rights, rules, duties, and obligations of the insurance company and policyholder
Endorsements
Written amendments attached to the policy to change the original policy language.
Pair and Set Clause
Common property policy provision stating that if one half of a pair or set is lost or damaged, a responsible and fair percentage of the value of both will be assessed. The insurer is not required to pay for the total value of the full set. The insurer may