Glossary of Terms
Accounts Receivable Coverage
This coverage provides protection for the following losses:
• All sums due you from customers, providing you are unable to effect collection thereof as a direct result of loss or damage to records of accounts receivable.
• Interest charges on any loan to offset impaired collections pending repayment of such sums made uncollectable by such loss or damage.
• Collection expense in excess of normal collection cost made necessary because of such loss or damage.
• Other expense, when reasonably incurred by you in re-establishing records of accounts receivable following loss or damage.
Actual Cash Value (ACV)
"Actual Cash Value" is the replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.
Additional Insured
An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insured's policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).
Aggregate
A limit, specified in the policy, that is the maximum total amount that the policy will pay for all losses sustained during the policy period. Aggregate limits typically appear in General Liability policies, but are not often used in property insurance, except with respect to certain catastrophic exposures such as earthquake or flood. There may be several aggregates within the policy. One is a coverage aggregate, while the other is a policy aggregate. The coverage aggregate is the most that particular coverage will pay for all losses incurred during the policy period. The policy aggregate is the most the policy will pay for all coverages for all losses incurred during the policy period.
Agreed Value Valuation
This coverage is used to remove the coinsurance requirement for covered property. With it, your company agrees that the amount of coverage purchased is adequate, and any coinsurance requirements are waived if the limit of insurance equals the agreed value.
Audit
An examination of the books of accounts, vouchers or other records of a person, corporation, firm or other organization for the purposes of ascertaining the accuracy or inaccuracy of the record ( in insurance, the rating base).
Automobile Liability Coverage
Protection for the insured (you) against loss arising out of legal action (liability) when his/her auto injures others or damage their property (includes Bodily Injury Liability and Property Damage Liability).
Automobile Physical Damage
The Collision and Other Than Collision coverage provisions in the Automobile insurance policy.
Blanket Coverage
A blanket form is one in which property is insured under a single amount applying to several different pieces of property rather than a specific amount of insurance on each property.
Bodily Injury by Accident Limit
This is the maximum amount your insurer will pay under Coverage B, Employers’ Liability, for all claims arising out of any one accident, regardless of the number of claims that may arise out of the accident.
Bodily Injury by Disease Each Employee
This is the maximum amount your insurer will pay for damages due to bodily injury by disease to any one employee.
Bodily Injury by Disease - Policy Limit
This is the maximum amount your insurer will pay, in aggregate, for employee bodily injury by disease claims during the policy period regardless of the number of employees who make such claims.
Boiler & Machinery - Mechanical Breakdown
This form of insurance provides mechanical breakdown coverage generally not available under any other insurance policy. This provides protection against the catastrophic effects of property loss, such as a steam boiler explosion or an expensive breakdown of machinery and equipment. This includes more than just boilers and steam vessels, but also includes refrigeration equipment, air conditioning equipment, various types of piping, turbines, engines, pumps, compressors, blowers, gearing, shafting, electric motors, generators, transformers, and assorted other types of mechanical and electrical equipment.
Builders Risk
Indemnifies for loss of or damage to a building under construction. Insurance is normally written for a specified amount on the building and applies only in the course of construction. Coverage customarily includes fire and extended coverage and vandalism and malicious mischief. Builders risk coverage can be extended to a "special" form as well. The builders risk policy also may include coverage for items in transit to the construction site (up to a certain percentage of value) and items stored at the site.
Buildings
Building coverage provides protection for permanent structures listed in the policy. Completed additions, permanently installed fixtures, machinery and equipment, outdoor fixtures, owned personal property used to service, repair or maintain the building and additions under construction or repair are all included in this definition.
Business Income
Coverage for loss of income in case the insured's business is shut down by a covered cause of loss. It often pays for such expenses as the rebuilding of an accounts receivable data base, cleaning computers, leasing temporary office space, and similar losses associated with a disaster.
Business Personal Property
This coverage protects personal property owned by your firm and used in your operations. Furniture and fixtures, and equipment and machinery are generally classified in this category.
Claims-Made Form
A type of liability policy which covers claims which are presented to the carrier while the policy is in effect. Once the policy has expired, no claim is paid under the policy which had not been presented to the carrier, even if the claim occurred during the policy period.
Co-Insurance
A policy may contain a coinsurance clause requiring that the limit of coverage be a minimum percentage (usually 80%) of the insurable value of your property. If the amount of insurance carried is less than what is required by this clause, any claim payment may be reduced by the same percentage as the deficiency.
An Example of how the Coinsurance Clause works as follows: Insurance Carried ------------------------- X Amount of Loss - Less Deductible = Amount Paid Insurance Required Assuming an 80% Coinsurance Clause: Insurable Value at the time of loss = $500,000 Insurance Carried = $320,000 Insurance Required = $400,000 (80% of $500,000) Amount of Loss = $50,000 Deductible = $10,000 Insurance Carriers = $320,000 ---------------------------------------- X ($50,000 - $10,000) = $40,000 Insurance Required = $400,000 Amount of Loss = $50,000 Amount Paid = $40,000 NOT COVERED = $10,000 (Coinsurance Penalty)
Collision Insurance
Protection against loss resulting from any damage to the policyholder's automobile caused by a collision with another vehicle or object, or by upset of the insured automobile, whether it was the insured's fault or not (other than his/her own willful act).
Combined Single Limit
A liability coverage limit that combines both Bodily Injury and Property Damage into one aggregate amount.
Commercial General Liability Policy
Often referred to as CGL, this policy provides broad protection for situations in which a business must defend itself against lawsuits or pay damages for personal injury or property damage to third parties. The two basic coverage forms available under the CGL are an occurrence form and a claims-made form, providing an extended reporting period. These forms include the following coverages: Bodily Injury and Property Damage Liability; Personal Injury and Advertising Injury Liability; Medical Payments; and as applicable, Products and Completed Operations coverage. Unless modified, an aggregate limit applies to the first three coverages, and a separate aggregate applies to the Products and Completed Operations coverage. Coverage is provided for most of the premises, products, completed operations, personal injury, advertising, and contractual liability exposures of an organization. This coverage form may be issued as a standalone policy, or in conjunction with other coverage forms like Commercial Auto, Property, or Inland Marine.
Contractual Liability Insurance
Provides coverage for claims arising out of liability that has been assumed by the insured under a written or oral contract.
Damage to Premises Rented to You
Under your General Liability, this coverage will pay for damages to any one premises you rent, but do not occupy, or in the case of fire or explosion, while rented to you or temporarily occupied by you with permission of the owner, but only to the limit designated on the policy declaration page.
Deductible
A provision in an insurance contract stating that the insurer will pay that amount of any insured loss that is in excess of a specified amount. The specified amount is the deductible.
Directors & Officers Liability
Designed for the Directors and Officers of boards, corporations, or nonprofit organizations, this coverage provides protection for claims arising from the fiduciary duties owed the corporation, shareholders, or other third parties from certain fiduciary, tortuous conduct, fraud or deceit, or the violation of certain statutes.
Drive Other Car Coverage
Fills the coverage gap that exists when the driver of a company car or his/her spouse drives some other vehicle (for instance, a friend’s car). Coverage can also be provided for children of driving age. This coverage should be purchased for any employees with company cars who do not have other cars personally insured in their household.
Employee Benefit Liability
This coverage protects you, an employer, from claims by employees or former employees resulting from negligent acts or omissions in the administration of your employee benefits programs. Employee Benefits programs can be defined include group life, health, and accident insurance, profit sharing plans, employee stock subscription plans, and workers' compensation, unemployment insurance, social security benefits, disability benefits, etc.
Employee Dishonesty Coverage
Employee dishonesty coverage protects an employer from financial loss due to the fraudulent activities of one or more employees. The coverage includes protection for loss of money, securities, and other property of the insured. Some scheduled policies are still available, but the majorities are written on a blanket basis. This provides coverage for all employees, subject to the policy definitions. The limit of liability is "per loss" and is applied on an "occurrence" basis. All acts involving the same employee or group of employees is considered one occurrence.
Employers' Liability Insurance
Provides protection for the employer for those bodily injuries, whether accident or disease, sustained by employees in the course of employment, not otherwise covered under workers' compensation law.
Employment Related Practices Liability
This insurance defends and pays losses incurred by you for wrongful employment acts. Wrongful employment acts includes alleged acts of discrimination, harassment, negligent hiring and/or inappropriate employment decisions made by you, against employees, both past and present, or an applicant for employment.
Errors & Omissions Liability
This insurance provides defense and pays losses which you are legally obligated to pay for monetary losses incurred by third parties as a result of your wrongful acts (errors or omissions committed solely in the performance of, or failure to perform professional services). Unlike Directors & Officers coverage, which is restricted to those individuals, this coverage is typically written for the corporation or organization.
Excess / Umbrella
This type of liability insurance provides coverage over a single underlying policy, or several different underlying policies. The limits provided by this policy will not respond to the loss until after some specified underlying policies limits are spent, exhausted, or otherwise not available. If underlying limits are not available, and the coverage is not excluded from the Excess/Umbrella coverage, this policy will respond as primary.
Exclusion
A provision in the insurance policy which denies coverage for certain perils, persons, property or locations.
Extra Expense
This insurance is designed to pay for costs in excess of normal operating expenses that are incurred by a business in order to continue operations without interruption after a direct property loss, or in order to minimize the interruption. This coverage is not a substitute for Business Income (Interruption) coverage, as this coverage does not provide any recovery for any loss of income, despite all efforts to continue operations.
Forgery or Alteration coverage
This type of insurance covers loss sustained through forgery or alteration of outgoing negotiable instruments made or drawn by you, or drawn on your account(s), or made or drawn by one acting as your agent. This includes loss caused by any of the following: • Checks or drafts made or drawn in your name, payable to a fictitious entity. • Checks or drafts, including payroll checks, executed through forged endorsements. • Alteration of the amount of a check or draft.
Garage Liability
Insurance to protect garages, service stations, vehicle rental agencies, car washes, owners of automobile, trailer, or RV vehicle dealerships from liabilities arising out of their business operations and the sale or use of autos, from claims alleging bodily injuries or property damage caused by the operator's negligence.
Garage Keepers' Liability (Garage Keeper Legal Liability)
An insurance contract that protects a garage operators against direct damage or legal liability for damage to vehicles in his care, custody or control caused by specific perils. This coverage is included as part of a garage coverage or as a separate endorsement.
General Liability Insurance
A broad term meaning liability insurance, other than automobile liability or employers' liability, written to cover professional and commercial risks. In respect to commercial liability, various available coverages could cover such risks as premises and operations, contractual liability, products and completed operations. A form of insurance designed to protect owners and operators of businesses from a wide variety of liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of insured, products sold by the insured, operations completed by the insured and liabilities assumed by the insured through specific types of contracts.
Hired Automobile Coverage
This coverage protects against claims arising out of the use of vehicles leased, hired, rented or borrowed by you or your employees while in the course of business.
Hold Harmless Agreement
A statement or warranty, typically in contracts, whereby one party agrees not to pursue legal action or suit for injuries sustained by that party, as a result of the actions of the other party. A contractual assumption of the liability exposures of another. As an example, a lease agreement commonly requires the tenant to hold the landlord harmless for bodily injury or property damage experienced by others on the premises.
Improvements and Betterments (Tenants)
Insurance coverage that protects a tenant or lessee of real property against loss as a result of a covered cause of loss, of improvements made by him/her to the real property in which he/she resides. Some property policies use the term "improvements and additions" in describing the coverage.
Inflation Guard
This coverage is used to automatically increase the limits of insurance on covered property by a predetermined percentage at regular intervals. Its purpose is to eliminate the risk that inflation will lead to coinsurance penalties and underinsurance.
Inland Marine
This insurance coverage (sometimes referred to as a floater) is just property insurance for property loss exposures which cannot be conveniently or reasonably confined to a fixed location or a standard form. This may include movable property, instrumentality's of transportation and communications (such as bridges, roads, piers, and television and radio towers), and the legal liability coverage of bailees. This also includes electronic data processing equipment.
Indemnification
When insurance policies are written on an "indemnification" basis, the insurance company will reimburse the insured for claim costs already paid. Technically, the insured must not only suffer a loss, but must also pay the loss before being reimbursed (indemnified) by the company.
ISO
The abbreviated reference to Insurance Services Office, Inc. . The organization, whose members are insurance companies nationwide, is the largest rating bureau in the United States. ISO is responsible for many lines of insurance, including fire, commercial and personal auto, homeowners, general liability, inland marine, and crime. It handles both personal and commercial lines, as well as both property and liability. The main function of ISO is the development of standardized industry coverage forms and rates.
Kidnap and Ransom Insurance
Written for financial institutions and other corporations, this insurance covers named employees for individual or aggregate amounts paid as ransom, with deductibles requiring the insured to participate in approximately 10% of any loss.
Knowledge of Occurrence
Typically in a policy, this will describe when knowledge of an accident or occurrence is considered to be known to the insured person.
Liquor Liability
This type of liability insurance provides coverage for bodily injury or property damage for which you may be held liable by reason of: Causing or contributing to the intoxication of any person; Furnishing alcoholic beverages to a person under legal drinking age or under the influence of alcohol; or Violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.
Loss
An occurrence that is the basis for submission and/or payment of a claim. Losses can be covered, limited or excluded from coverage, depending on the terms of the policy.
Malpractice Insurance
Coverage afforded to a professional practitioner, such as a doctor or a lawyer, against liability claims for damages resulting from alleged negligence in the performance of the insured's services.
Medical Expense Payments
This is a coverage under the General Liability coverage. This coverage will reimburse an injured party for medical and/or funeral expenses incurred as a result of bodily injury or death sustained by accident under the conditions specified in the policy, regardless of whether you are liable or not. The most we will pay for any one person is the limit specified in the policy.
Medical Payments Automobile Insurance
Coverage, in states which are other than a no-fault state, which pays medical and hospital expenses and the expense of funeral services resulting from an automobile accident, regardless of the liability of the insured. This is a first-party coverage.
Negligence
The failure of a person to exercise the care that a prudent person would exercise under similar circumstances.
Non-Owned Automobile Liability
This coverage provides liability protection for autos used in your business that are not owned, leased, hired, rented or borrowed. This includes automobiles of employees and subcontractors that are used on behalf of the business.
Occurrence
An accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Ordinance or Law Coverage
This property coverage is broken into three parts described below: • Coverage for Loss to the Undamaged Portion of the Building - Pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc. • Demolition Cost - Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law. • Increased Cost of Construction - Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Personal Injury Liability Insurance
Protection against liability for damages other than physical injury arising out of false arrest, detention or imprisonment, or malicious prosecution; libel, slander or defamation of character; invasion of privacy, wrongful eviction or wrongful entry.
Personal Injury Protection (PIP)
That section (in a no-fault state) of the automobile policy that covers the treatment of injuries to the driver and passengers of an insured's car.
Pollutant Cleanup and Removal
This is an aggregate first party coverage that applies to your expense in extracting "pollutants" from land or water at your location, if the release of the pollutants is caused by or results from a covered loss.
Pollution Insurance
This is a coverage that protects an insured from property loss or liability arising from pollution-related damages. Pollution may be the contamination of water, soil, or air by means of solid, liquor or gaseous (vapors, smoke or heat) contaminants.
Products Liability
The section of the policy that protects against financial loss arising out of legal actions (liability) incurred by a manufacturer, merchant or distributor because of injury or damage resulting for the use of a covered product.
Retention
The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
Replacement Cost Valuation
This loss valuation method pays for the cost to repair or replace damaged items with like kind and quality without deduction for depreciation. This is important since you could face a substantial loss if you must replace property at today’s prices but receive only the depreciated value of the property that was destroyed.
Schedule
A list describing the property or items insured under the policy and the extent which they are insured.
Special Causes of Loss
This coverage will protect covered property against direct loss arising from any cause not specifically excluded. The advantage of this form is that the insurance company must prove that a loss is specifically excluded in order to deny coverage under the policy.
Stock
Raw or finished goods and Inventories are generally classified under this property category
Subrogation
A principle of law incorporated in insurance policies that enable the insurance company, after paying a loss to its insured, to recover the amount of the loss from another who is legally liable for it.
Third Party
A person who files a liability insurance claim against another person or entity (first party).
Tort
Any wrongful act, damage or injury done willfully, negligently or in circumstances involving strict liability, but not involving breach of contract, for which a civil lawsuit can be brought.
Transit Coverage
Coverage of the insured's property while in transit over land from one location to another. Property insurance policies typically provide coverage only at locations identified in the policy.
Uninsured Motorists Coverage (UM)
Pays the policyholder and passengers in his/her car for losses sustained by reason of bodily injury, sickness, disease or death caused by the owner or operator of an uninsured automobile or a "hit-and-run" driver.
Uninsured Motorists Property Damage Coverage (UMPD)
Provides coverage to a vehicle involved in an accident with an uninsured motorist. UMPD is similar to "collision coverage", and is not available to those who purchase "collision coverage".
Unintentional Error or Omission
Typically in the policy, this will describe the effect upon the policy of an error, omission or misrepresentation of information on your application, or with information presented at the time of a claim.
Valuable Papers Coverage
An "all risk" insurance coverage that covers the cost of research to reconstruct damaged records, as well as the cost of new paper and transcription. The term "valuable papers" refers to written, printed, or otherwise inscribed documents and records, including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts.
Waiver of Right of Recovery
In the insurance policy, if a claim is paid under the policy, which is also covered by another person, organization, or other insurance policy, the insured or the insurance company has the right to pursue collection of the amount paid, or any portion there under, from that other party. A Waiver of Right of Recovery means that the insured has agreed, prior to a claim, that no one will not attempt to collect (sometimes referred to as subrogation) from the other party, any amounts paid under the insurance policy, even if those amounts should have been paid by them or their insurance. If the insurance company has agreed to put the Waiver of Right of Recovery provision in the policy, it typically acknowledges that its right of recovery is forfeited, provided the insured has so agreed with another party to waive their right of recovery.
Weekly Indemnity
The insurance will pay, after an established waiting period, an agreed weekly sum for lost wages incurred by person (if at the time of the injury they were gainfully employed), if they are unable to work as a result of injuries incurred during an activity, operation or event of yours.
Workers' Compensation
A system (established under state laws) under which employers provide insurance for benefit payments to employees for their work-related injury, death and disease regardless of fault. Not to be mistaken as health insurance. This coverage form provides coverage in two ways; (1) compensation for the employee for job-related injuries, regardless of negligence, and (2) protection (Employers Liability) from liability suits brought by workers against the employer.
