The terms and definitions provided here are not meant to be all inclusive but informational in nature and should NOT replace the guidance, advice, or recommendations from licensed insurance or legal professionals, other industry experts, or state and federal authorities. Only the relevant insurance policy and endorsements provide the terms and conditions of coverage.
A
- Accident: An unexpected, unforeseen event not under the control of an insured resulting in a loss, such as “bodily injury” or property damage.
- Actual Cash Value (ACV): The cost of replacing damaged or destroyed property with comparable property minus depreciation.
- Additional Insured: A secondary party added to an insurance policy other than the named insured that extends coverage to that party.
- Adjuster: A person responsible for investigating the merits of a claim and making recommendations to an insurance company based upon estimates of damage and the insurance policy held.
- Agent/Broker: A licensed insurance professional who solicits, negotiates, and sells insurance policies either independently (by representing at least two insurance companies) or directly (by representing just one insurance company and sells only its policies). Agents/brokers typically act as intermediaries between an insured and the insurance company and offer advice about insurance coverage, limits, policy terms, etc.
- Agent of Record/Broker of Record: An individual insurance agent or insurance agency authorized by an insured to represent the insured in the purchase, servicing, and maintenance of its insurance program with a designated insurer.
- Aggregate: The maximum dollar amount or total amount of insurance coverage payable for a single loss, or multiple losses, during a policy period or on a single project.
- Application for Insurance: Written or digital form on which a prospective insured (or their agent/broker) discloses facts requested by the insurer in order to evaluate the risk of providing insurance coverage and the appropriate premium charge.
- Appraisal: A valuation of property for damage resulting from an insured peril or for establishing the base amount of insurance coverage to be purchased.
- Audit: An examination of an insured’s operations, records, and books of account to determine the actual exposure units and premium for insurance coverages already provided; usually performed at the end of a policy term or upon cancellation of coverage.
B
- Binder: A temporary insurance contract providing coverage until a permanent policy is issued.
- Blanket Coverage: Coverage for property and liability that typically extends to more than one location, class of property, or individual.
- Bodily Injury: Physical damage to one’s person, including bodily harm, sickness, disease, or death.
- Business Income/Business Interruption Insurance: Designed to replace a business’s lost earnings if the business is unable to operate due to a covered loss.
- Businessowner’s Policy (BOP): Designed as a combination Property, Liability, and Business Interruption policy usually written to cover expenses of small- and medium-size businesses.
C
- Carrier/Insurer: An insurance or reinsurance company that underwrites and issues an insurance policy. The insurance company assumes or “carries” the risk for policyholders.
- Certificate of Insurance: A document issued by an insurer to verify the existence of insurance coverage under specific conditions and granted to listed individuals.
- Claim: A request by an insured (person or business) for indemnification by an insurance company for a loss incurred.
- Claimant: A party that makes a claim; can be either a first-party claimant or a third-party claimant.
- Claims Adjuster: See “Adjuster.”
- Claims Reserve: A monetary fund established to pay for claims that the insurance company is aware of but are not yet settled.
- Class Rate: A rate applied to risks with similar characteristics or to a specified class of risk.
- Collision: Physical contact of an automobile with another object resulting in damage to an insured vehicle.
- Commercial Auto Insurance: Also referred to as Business Automobile Policy (BAP), designed to cover the costs of damage or destruction to an insured vehicle (those used for business purposes) and expenses associated with liability for bodily injury or property damage arising out of vehicle use.
- Commercial Excess Liability Insurance: See “Commercial Umbrella Liability Insurance.”
- Commercial Insurance: Designed to: (1) protect a business’s assets, such as: buildings and contents, tools and equipment, automobiles used by the business, etc., and (2) cover certain legal liability associated with the business.
- Commercial Package Policy (CPP): Designed to accommodate the needs of larger, more complex operations and those with multiple exposures; the package typically includes a combination of independent insurance policies (property, liability, crime, umbrella, etc.)
- Commercial Property Insurance: Designed to pay to replace or repair business property that is damaged or destroyed due to a covered cause of loss. Sometimes combined with Commercial General Liability coverage as part of a Businessowner’s Policy or Commercial Package Policy. See “Property.”
- Commercial Umbrella Liability Insurance: Designed to provide an additional layer of liability insurance over and above an insured’s underlying Commercial Insurance policies (i.e., Businessowner’s, General Liability, Commercial Auto, etc.). (Also known as Commercial Excess Liability Insurance in some states.)
- Commission: A percentage of the insurance premium an insurer pays to the agent/broker for new policies sold or existing policies renewed.
- Conditions: Insurance policy provisions that qualify or place limitations on the insurer’s promise to pay or perform.
- Coverage: Protection under an insurance policy.
- Cyber Insurance: Designed to protect businesses from the financial risk of data breaches and other cyber security issues.
D
- Damages: The sum an insurance company is legally obligated to pay an insured for losses incurred.
- Date of Loss: The date on which an incident took place resulting in a claim.
- Declarations: A part of the insurance policy that identifies the insured, the risks or property covered, the policy limits, and policy period.
- Declination: Rejection by an insurance company of an application for insurance coverage.
- Deductible: The amount an insured must pay up front on a claim in any one occurrence or policy period. The carrier/insurer will then pay the amount of loss or damage in excess of the deductible up to the applicable limit of insurance.
- Depreciation: Actual or accounting recognition of the decrease in value of a hard asset (property) over a period of time.
- Disability Insurance: Designed to provide short-term benefits to eligible employees of a company who have a full or partial loss of wages due to a non-occupational illness or injury or due to pregnancy.
E
- Employer’s Liability Insurance: Designed to cover the legal liability of employers arising out of injuries to employees. Generally, part of a statutory Workers’ Compensation policy.
- Employment-Related Practices Liability Insurance: Designed to protect a business against claims by employees that their legal rights as employees have been violated; protects against loss incurred in litigating and settling wrongful employment practices liability claims.
- Endorsement: Provisions of an insurance policy that add to, delete, or modify provisions of the base insurance contract.
- Errors and Omissions: Negligent acts resulting in bodily injury, personal injury, and/or property damage liability to a client. See also “Professional Liability.”
- Excess and Surplus Insurance: Insurance coverage not available from an admitted insurance company in the regular market.
- Exclusions: Insurance policy provisions referring to hazards, perils, circumstances, or property not covered by the policy.
- Expiration: Termination date of coverage as indicated by the insurance policy.
- Exposure: Possibility of loss.
F
- Frequency: The number of times a loss occurs.
G
- General Liability Insurance: Designed to provide coverage for an insured for financial loss, including medical expenses and attorney fees, resulting from bodily injury or property damage for which the company may be legally responsible.
H
- Hazard: Any situation or condition that increases the possibility or severity of a loss.
- Homeowners Insurance: Designed to cover losses or damages to an individual’s property, primarily their residence, along with furnishings and other assets in and around the home. The policy may also provide liability coverage for harm from incidents that occur in the home or on the property.
I
- Improvements and Betterments: Fixtures, alterations, installations, or additions that increase the value of a property.
- Incurred Losses: Losses which have occurred within a stipulated time period whether paid or not.
- Indemnity: Compensation for a loss.
- Inland Marine: Transit over land.
- Inspection: In Commercial Insurance, the right retained by the insurance company to inspect the insured premises as well as its operations in order to detect inherent structural defects or other hidden hazards.
- Insurance Policy: A legal agreement between two parties, the insurer and the insured, which provides a guarantee of indemnification for specified loss (damage, injury, illness, or death) per the policy terms in exchange for the payment of a premium.
- Insured: Any person or organization covered by an insurance policy.
- Insurer: See “Carrier/Insurer.”
- Insuring Agreement: The section of an insurance policy stating the circumstances in which the insurance company will cover losses in exchange for a premium.
J
K
L
- Liability Insurance: See “General Liability.”
- License: In insurance, legal authority obtained by an insurance company, agent, broker, or consultant which permits them to do business in a particular state.
- Limitations: Exceptions and limitations in coverage; the maximum amount of insurance coverage available under a policy.
- Litigation: The process of taking legal action.
- Loss: The injury or damage sustained by an insured in consequence of the happening of an accident or misfortune.
- Loss Control: Risk-management techniques that aim to lower the frequency and/or severity of potential incidents resulting in financial loss for an insured.
- Loss Exposure: Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs.
- Loss Run: A report that provides a snapshot of an insured’s current and past insurance claims.
M
- Medical Management: A collaborative process that facilitates recommended treatment plans to assure the appropriate medical care is provided to disabled, ill or injured individuals. Often used as part of Workers’ Compensation Insurance to help the injured employee recover quickly under medical guidance and return to work in a reasonable timeframe.
N
- Named Insured: A person, business, or organization specified as the insured(s) on a policy.
- Negligence: Failing to act with the legally required degree of care for others, resulting in harm to them.
O
- Occurrence Basis: Coverage for a loss occurring while an insurance policy is in force, regardless of when the claim is actually made.
- Optional/Supplemental Coverages: Additional coverages that can be added to a base insurance policy via endorsement.
P
- Peril: Source of loss such as fire, wind, etc.
- Personal Insurance: Non-commercial coverages designed to protect individuals against financial loss due to death, injury/illness, damage to property, liability, etc.
- Personal Umbrella Policy: Designed to provide an additional layer of insurance over and above an insured’s underlying Homeowners or Personal Auto policy.
- Policy: A formal agreement which binds insurance coverage.
- Policyholder: A person or business entity who has purchased and owns the insurance policy.
- Premium: The amount of money a business or individual pays for an insurance policy for a specified period.
- Premium Audit: See “Audit.”
- Premium Discount: A reduction applied to an insurance premium.
- Property: Commercial or personal assets covered by an insurance policy.
- Producer: See “Agent/Broker.”
- Professional Liability Insurance: Often referred to as Errors & Omissions coverage, a type of business insurance designed to protect professionals against claims of wrongdoing (negligence, errors, defamation, etc.) by clients or customers. Designed to cover the expense of damages caused by a professional service or product.
- Pro-Rata Cancellation: Revocation of a policy prior to its expiration date, which returns to the policyholder unearned premium (the portion of the premium for the remaining policy period).
Q
R
- Rate: The price per exposure unit for insurance coverage.
- Reinstatement: The restoration of an insurance policy that has lapsed, typically because of nonpayment of premiums after a grace period has expired.
- Renewal: The reestablishment of an insurance policy’s in-force status, usually achieved through payment of premium due.
- Replacement Cost Value: The cost of replacing damaged or destroyed property with comparable property without any deduction for depreciation.
- Rider: An endorsement to an insurance policy that modifies clauses and provisions of the policy, adding or excluding coverage.
- Risk: In insurance, exposure to possible loss.
S
- Seasonal Risk: Exposure to loss present only at certain times of the year.
- Submission: See “Application for Insurance.”
- Subrogation: Process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from another party (other than the insured) who caused the loss or is otherwise legally liable for the loss.
T
U
- Underwriter: An individual employed to determine if an applicant is insurable and at what rate, based on the exposure to loss.
- Underinsured: The failure to maintain adequate coverage for a specific loss or damage.
V
- Valuation: The method of determining the worth of property to be insured or of property that has been lost or damaged.
W
- Waiver of Subrogation: A policy provision whereby an insured waives the right of their insurance company to seek redress or compensation for losses from a negligent third party.
- Workers’ Compensation Insurance: An insurance policy purchased by an employer/business entity and designed to cover the costs of medical care and lost wages that result from a job-related injury, illness, or fatality. The policy also serves to protect employers from lawsuits relative to such incidents.
