Diligent efforts have been made by Golden Pacific Insurance Services staff to provide
you with an up-to-date and comprehensive glossary of insurance terms. However, this
glossary is not put forth as the final authority.
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Absolute Liability. A type of liability that arises from extremely dangerous
operations. See also Strict Liability.
Accident. An unplanned event, unexpected and undesigned, which occurs suddenly
and at a definite place. See also Occurrence.
Accident Frequency. The rate of the occurrence of accidents often expressed in
terms of the number of accidents over a period of time. It is one method used for
measuring the effectiveness of loss prevention services.
Accident Severity. The measure of the severity or seriousness of losses, rather
than the number of losses. It is measured in terms of time lost from work rather than the
number of individual accidents. It is another way of measuring the effectiveness of loss
prevention services.
Act of God. An event arising out of natural causes with no human intervention
which could not have been prevented by reasonable care of foresight. Examples are floods,
lightning and earthquakes.
Actual Cash Value. An amount equivalent to the replacement cost of lost or
damaged property at the time of the loss, less depreciation.
Additional Insured. A person other than the named insured who is protected under
the terms of the contract. Usually, additional insured's are added by endorsement or
referred to in the wording of the definition of "insured" in the policy itself.
Additional Living Expense Insurance. A contract to reimburse the insured for
increased living costs when loss of his property forces him to maintain temporary
residence elsewhere.
Adjuster. A representative of the insurer who seeks to determine the extent of
the firm's liability for loss when a claim is submitted.
Advertising Injury. Injury arising out of libel or slander, violation of the
right to privacy, misappropriation of advertising ideas, or infringement of copyright,
title or slogan committed in the course of advertising goods, products, or services.
Agency . When one person acts on behalf of another person.
Agent. One who solicits, negotiates or effects contracts of insurance on behalf
of an insurer.
Aggregate Limit. Usually refers to Liability Insurance and indicates the amount
of coverage that the insured has under the contract for a specific period of time.
Aggregate Products Liability Limit. This limit represents the amount of money,
which an insurer will pay during the term of a policy.
Agreed Amount Clause. Under this clause, the insured and the insurer agree that
the amount of insurance carried will automatically satisfy the coinsurance clause.
Alien Insurer. An insurer formed under the laws of a country other than the
United States. A U.S. company selling in other countries is also an alien insurer.
All-Risks Insurance. The term is used to mean insurance against loss of or
damage to property arising from any fortuitous cause except those that are specifically
excluded.
Appraisal. An evaluation of property made to ascertain either the appropriate
amount of insurance to be written or the amount of loss to be paid.
Appurtenant Structures. Buildings on the same premises as the main building
under a Property Insurance Policy.
Arbitration Clause. The provision in a Property Insurance contract which states
that if the insurer and insured cannot agree on an appropriate claim settlement, each will
appoint an appraiser and these will select a neutral umpire.
Arson. The willful and deliberate burning of property.
Automobile Insurance. A type of insurance which protects the insured against
losses involving automobiles.
Average Clause. A clause providing that similar items in one location or several
locations which are insured by a policy shall be covered in the proportion that the value
of each bears to the value of all.
Avoidance of Risk. Taking steps to remove a hazard, engage in an alternative
activity, or otherwise end a specific exposure. See Risk Management.
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Bailee. A person or concern having possession of personal property entrusted to him
by the owner.
Bailees Customer Insurance. Insurance purchased by a bailee to protect the
personal property of his customers against loss caused by specific perils.
Bailees Liability Coverage. Coverage that meets the needs of a bailee's
liability. His legal responsibility is to exercise care appropriate to the circumstances
of the bailment.
Binder. An agreeement executed by an agent or insurer (usually the latter)
putting insurance into force before the contract has been written or the premium paid.
Blanket Crime Policy. A policy which provides coverage for employee dishonesty,
loss of money and securities inside and outside the premises, depositor's forgery, loss of
money orders, and counterfeit paper currency.
Blanket Insurance. A form of Property Insurance that covers, in a single
contract, either multiple types of property at a single location or one or more types of
property at multiple locations.
Boiler and Machinery Insurance. Insurance against the sudden and accidental
breakdown of boilers, machinery, and electrical equipment. Coverage provided: damage to
equipment, expediting expenses, property damage to the property of others, supplementary
payments and automatic coverage is additional objects.
Brick Construction. Refers to a building where at least 75% of the exterior
walls are of some type of masonry construction, i.e., brick stone or hollow masonry tile,
poured concrete or reinforced concrete, or hollow masonry block.
Brick Veneer Construction. Refers to a building where the outside walls are
constructed of wood with a facing of a single layer of brick.
Broker of Record. A broker who has been designated to handle certain insurance
contracts for the policy holder.
Builder's Risk Coverage Form. A commercial property coverage form specifically
designed for buildings in the course of construction.
Burglary. Breaking and entering into the premises of another with felonious
intent, leaving visible signs of forcible entry or exit.
Business Auto Coverage Form. The latest commercial Automobile Insurance coverage
form, which may be written as a monoline policy or as part of a commercial package.
Business Income Coverage Form. A commercial property form providing coverage for
"indirect losses" resulting from property damage, such as loss of business
income and extra expenses incurred.
Business Personal Property. Traditionally known as "contents," this
term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials,
and all other personal property owned by the insured and used in the insured's business.
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Care, Custody and Control. Most Liability Insurance policies exclude coverage for
damage to property in the care, custody, or control of the insured.
Certificates of Insurance. A form which verifies that a policy has been written
and states the coverage in general, often used as proof of insurance in loan transactions
and for other legal requirements.
Claims-Made Coverage. A policy providing liability coverage only if a written
claim is made during the policy period or any applicable extended reporting period.
Coinsurance Clause. A clause under which the insured shares in losses to the
extent that he is underinsured at the time of loss.
Collision Insurance. A form of Automobile Insurance that covers loss to the
insured's own vehicle caused by its collision with another vehicle or object or its upset
but not covering bodily injury or property damage liability arising out of the collision.
Commercial General Liability (CGL) Coverage Part. General liability coverage
which may be written as a monoline policy or part of a commercial package.
Commercial Package Policy (CPP). A commercial lines policy that contains more
than one of the following coverage parts: commercial property, Commercial General
Liability, Commercial inland Marine, Commercial Crime, Boiler and Machinery insurance,
Commercial Automobile Insurance and Farm coverage.
Comprehensive General Liability. A policy covering a variety of general
liability exposures, including Premises and Operations (OL&T or M&C), Completed
Operations, Products Liability, and Owners and Contractors Protective.
Concurrent Causation. A term referring to two or more perils acting concurrently
(at the same time or in sequence) to cause a loss.
Consequential Loss (or Damage). An indirect loss arising out of the
policyholder's inability to use the property over a period of time, as opposed to a direct
loss that happens almost instantaneously.
Contingent Business Interruption Insurance. Coverage for the loss of earnings of
an insured because of a loss to another business which is one of the insured's major
suppliers or customers.
Coverage. The scope of the protection provided under a contract of insurance.
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Debris Removal Clause. A provision that may be included in a Property policy
contract to provide the insured with indemnification for expenditures incurred in the
removal of debris produced by the occurrence of an insured peril.
Declination. Rejection of an application for insurance by the insurer.
Deductible. The portion of an insured loss to be borne by the insured before he
is entitled to recovery from the insurer.
Demolition Clause. A provision that excludes liability for costs incurred in
demolishing undamaged property, often necessitated by building ordinances requiring that
structures must be demolished after a certain degree of damage has been sustained.
Directors and Officers Liability Insurance. Insurance that protects directors,
and officers from liability claims arising out of alleged errors in judgment, breaches of
duty, and wrongful acts related to their organizational activities.
Dram Shop Liability insurance. A form of insurance contract that protects the
owners of an establishment in which alcoholic beverages are sold against liability arising
out of accidents caused by intoxicated customers who have been served or sold the
alcoholic beverages.
Drive-Other-Car Endorsement. A coverage that may be added to an Automobile
policy auto coverage to the individuals named in the endorsement while they are driving
cars not owned by the individuals and not named in the policy.
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Earned Premium. The amount of the premium that has been "used up" during
the term of a policy.
Earth Movement. A peril including landslide, mudflow, earth sinking, rising or
shifting, and earthquake.
Earthquake Insurance. Insurance covering damage caused by an earthquake as
defined in the contract.
Effective Date. The date on which the protection of an insurance policy or bond
goes into effect.
Electronic Data Processing (EDP) Coverage. Specialized type of insurance
designed to cover computer equipment, data systems, information storage media and expenses
or income loss related to EDP losses.
Employers Liability Coverage. This is coverage B of the standard Workers
Compensation policy. It provides coverage against the common law liability of an employer
for injuries to employees as distinguished from the liability imposed by a Workers
Compensation law.
Employers Nonownership Liability Insurance. Protects the employer for liability
arising from the use by employees of their own cars on company business.
Endorsement. A written or printed form attached to the policy which alters
provisions of the contract.
Endorsement Extending Period of Indemnity. An endorsement attached to Business
Interruption policies which extends coverage to the period during which a business has
reopened for business but have not reached the level of business activity which existed
prior to the Business Interruption loss.
Equipment Floater. A form which covers various types of equipment, e.g.,
construction equipment, against specified perils or occasionally on an all risk basis
subject to exclusions.
ERISA Liability. Liability imposed by law upon officers or other employees
operating in a fiduciary capacity for the proper handling of pension funds and other
employee benefits.
Errors and Omissions Insurance. A form of insurance which covers losses
resulting from financial institutions failing to effect insurance coverage.
Estimated Premium. A provisional premium which is adjusted at the end of the
year.
Exclusion. A contractual provision that denies coverage for certain perils,
persons, property or locations.
Experience Modification. The increase or decrease in premiums resulting from the
application of an experience rating plan, usually expressed as a percentage.
Expiration. The date indicated in an insurance contract as its termination date.
Extended Period of Indemnity. A Business Income coverage that continues coverage
for income losses for a period of time after operations have resumed.
Extra Expense Insurance. A form that provides reimbursement to the insured for
the extra expenses reasonably incurred to continue the operation of a business when the
described property has been damaged by a peril covered by the contract.
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Fiduciary. A person holding the funds or property of another in a position of
trust.
Fine Arts Floater. Covers fine arts, such as antiques, leaded glass, and other
art work of all types, usually on an all-risk basis.
Fire. Combustion which is rapid enough to produce a flame or glow.
Fire Legal Liability. An insurance policy which protects the insured against
liability incurred when his negligent actions result in the destruction of property which
is in his care, custody or control.
Fire Wall. A structure (wall) which is designed to seal off fires within a
building.
"First" Named Insured. The first named insured appearing on a
commercial policy. The latest forms permit the insurer to satisfy contractual duties by
giving notice to the "first" named insured rather than requiring notice to all
named insured.
Flat Cancellation. A policy which in cancelled upon its effective date.
Floater. A form of insurance that applies to movable property, whatever its
location, if it is within the territorial limits imposed by the contract. The coverage
"floats" with the property.
Flood. A general and temporary condition of partial or complete inundated of
normally dry land areas from
- overflow of inland or tidal water
- abnormal, flood-related erosion and undermining of shorelines.
Flood Insurance. A form of insurance designed to reimburse property owners from
loss due to the defined peril of flood.
Frame. A type of construction. A frame building is primarily made with wood
frames and joists.
Free on Board (FOB). The term has special significance in Marine Insurance,
where it is vital to determine when title passes from the seller to the buyer. If the
materials are shipped FOB point of destination, the seller is liable for damage caused
during the course of transportation.
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General Aggregate Limit. A Commercial General Liability limit that applies to all
damages paid for bodily injury, property damage, personal injury, advertising injury, and
medical expenses, except damages included in the products-completed operations hazard.
General Liability Insurance. 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 an insured, products sold by the insured, operations completed by the insured, and
contractual liability.
Governing Classification. The classification assigned to the operations of an
insured which carries the largest amount of payroll.
Guaranteed Cost. A premium charged on a prospective basis, fixed or adjustable,
or on a specified rating basis, but never on the basis of loss experience.
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Hazard. A specific situation that increases the probability of the occurrence of
loss arising from a peril, or that may influence the extent of the loss.
Highly Protected Risk (HPR). Refers to Property risks which meet the standards
required for lower rates. Risks of this type are usually protected by sprinklers and have
better-than-average construction and occupancy.
Hired Automobile. Autos the insured leases, hires, rents, or borrows, but not
autos owned by employees or members of their households.
Hold Harmless Agreement. A contractual agreement whereby one party assumes the
liability inherent in a situation, thereby relieving the other party of responsibility.
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Increased Cost of Construction. Insurance that covers the additional cost of
reconstructing a damaged or destroyed building where ordinances require rebuilding with
more expensive materials, services, or techniques.
Increased Hazard. Property Insurance policies provide that coverage shall be
suspended when the hazard in a risk is increased beyond that contemplated when the
insurance was written. If a dwelling owner commences manufacturing dynamite in his home,
the hazard is extremely increased, and coverage could be denied by the insurer if there
were a loss.
Incurred But Not Reported. This refers to losses, which have occurred during a
stated period, usually a calendar year, but have not yet been reported to the insurer as
of the date under consideration.
Incurred Losses. The losses occurring within a fixed period, whether or not
adjusted or paid during the same period.
Indemnify. To restore the victim of a loss to the same position as before the
loss occurred.
Indirect Loss (or Damage). Loss resulting from a peril but not caused directly
and immediately by that peril.
Insurable Interest. Any interest a person has in a possible subject of
insurance, such as a car or home, of such a nature that a certain happening might cause
him financial loss.
Insurance. A formal social device for reducing risk by transferring the risks of
several individual entities to an insurer. The insurer agrees, for a consideration, to
assume, to a specified extent, the losses suffered by the insured.
Insurer. The party to an insurance arrangement who undertakes to indemnify for
losses, provide pecuniary benefits, or render services.
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Joisted Masonry Construction. A building which has exterior walls constructed of
masonry materials, such as adobe, brick, concrete, gypsum block, hollow concrete block,
stone, tile, or other similar materials, and a roof and floor constructed of combustible
materials.
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Lapse. Termination of a policy because of failure to pay the premium.
Lapsed Policy. One which has been allowed to expire because of nonpayment of
premiums.
Law of Large Numbers. This law states that the larger the number of exposures
considered, the more closely the losses reported will match the underlying probability of
loss.
Legal Liability. Liability under the law as opposed to liability arising from
contracts or agreements.
Liability Insurance. That insurance which pays and renders service on behalf of
an insured for loss arising out of his or her responsibility to others imposed by law or
assumed by contract.
Libel. A written statement about someone which is personally injurious to that
individual.
Liberalization Clause. A clause in Property Insurance contracts which provides
that if policy or endorsement forms are broadened by legislation or ruling from rating
authorities and no additional premium is required.
License and Permit Bonds. Bonds often required by jurisdictions to be posted by
persons performing certain services, such as security dealers and plumbers.
Limit of Liability. The maximum amount for which an insurer is liable as set
forth in the contract.
Liquor Liability Insurance. See Dram Shop Liability Insurance.
Loss Adjustment Expense. The cost of adjusting losses, excluding the amount of
the loss itself.
Loss Control. Any combination of actions taken to reduce the frequency or
severity of losses. Installing locks, burglar or fire alarms and sprinkler systems are
loss control techniques.
Loss of Use Insurance. Coverage to compensate an insured for the loss of use of
his property if it cannot be used because of a peril covered by the policy.
Loss Payable Clause. A provision is Property Insurance contracts that authorized
payment to persons other than the insured to the extent that they have an insurable
interest in the property.
Loss Payee. The party to whom money or insurance proceeds is to be paid in the
event of loss, such as the lienholder on an automobile or the mortgagee on real property.
Loss Ratio. The losses divided by the premiums paid.
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Manufacturer's Selling Price Clause. Values unsold finished goods at the price at
which they could have been sold at the time of a loss.
Mobile Equipment. A term defined in General Liability policies as land vehicles,
including machinery and apparatus attached thereto, whether or not self propelled, and
- not subject to motor vehicle registration, or
- used exclusively on the insured's premises
- designed principally for use off public roads, or
- designed or maintained for the sole purpose of providing mobility for permanently
attached equipment such as cranes, loaders, pumps, generators, or welding equipment.
Modified Fire-Resistive Construction. A building which has exterior walls,
floors and roof constructed of masonry or fire-resistive materials.
Monopolistic State Fund. The state-operated company in those states having laws
which require that all businesses buy Workers Compensation Insurance from the state.
Mortgage (or Mortgagee) Clause. A provision attached to a Fire or other direct
damage policy that covers mortgaged property, specifying that the loss reimbursement shall
be paid to the mortgagee as the mortgagee's interest may appear, that the mortgagee's
rights of recovery shall not be defeated by any act or neglect of the insured, and giving
the mortgagee other rights, privileges, and duties.
Motor Vehicle Record (MVR). The record of an automobile driver's accidents
and/or traffic violations.
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Named Insured. Any person, firm, or corporation, or any member thereof,
specifically designated by name as the insured(s) in a policy. Others may be protected as
insureds even though their names do not appear on the policy.
Named Non-Owner Policy. An Automobile Insurance policy issued to someone who
does not own an automobile, but who drives borrowed or rented autos.
Negligence. Failure to use that degree of care which an ordinary person on
reasonable prudence would use under the given or similar circumstances.
No-Fault Insurance. Many states have passed laws permitting the individual
automobile accident victim to collect directly from his or her own insurance company for
medical and hospital expenses regardless of who was at fault in the accident. Most states
do allow the individual to sue the negligent party if the amount of damages exceeds a
certain stated limit.
Nonowned Auto. Any autos not owned, leased, hired, or borrowed which are used in
connection with the business.
Nonrenewal. Termination of insurance coverage at an expiration date or
anniversary date.
Notice of Cancellation. Written notice by an insurer of intent to cancel
insurance, or written notice by an insured requesting cancellation.
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Object. In Boiler and Machinery Insurance, the name of the vessel insured; the
object of insurance.
Occupational Safety and Health Act (OSHA). A federal statue which established
safety and health standards on a nationwide basis.
Occurrence. An event that results in an insured loss.
Occurrence Coverage. A policy form providing liability coverage only for injury
or damage that occurs during the policy period, regardless of when the claim is actually
made.
Off Premises. A clause in a Property Insurance contract extending coverage away
from the premises described in the policy.
Officers and Directors Liability Insurance. A type of insurance which protects
the officers and directors of a corporation against damages resulting from negligent or
wrongful acts which may harm the corporation or its stockholders.
Owners, Landlords, and Tenants Liability Insurance (OL&T). Coverage for an
insured against legal liability for bodily injury or property damage caused to others by
negligence and arising out of the ownership, maintenance, or use of the premises
designated in the policy and all operations necessary or incidental to those premises.
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Pair and Set Clause. A clause which states that if a part of a pair or set is lost
or damaged the measure of the loss shall be a reasonable and fair proportion of the total
value of the set, giving consideration to the importance of the article. The insurer is
under no obligation to pay for the total loss of a set when one part is lost, damaged, or
destroyed.
Peak Season Endorsement. An endorsement which provides increased amounts of
coverage on inventories during peak seasons, beginning and ending on dates specified in
the endorsement.
Peril. The cause of a possible loss.
Period of Restoration. The period during which Business Income coverage applies.
It begins on the date direct physical loss occurs and interrupts business operations, and
ends on the date that the damaged property should be repaired, rebuilt or replaced with
reasonable speed.
Personal Articles Floater. Originally an Inland Marine policy. It can be sold as
a separate policy or attached to an existing Property Insurance policy, such as a
Homeowners form.
Personal Property. Any property of an insured other than real property.
Personal Property of Others. Property, other than real property, which is not
owned by an insured.
Physical Damage. A term indicating damage from such perils as collision,
comprehensive, fire and theft or any damage to the vehicle itself.
Policy. The written statement of a contract effecting insurance, or certificates
thereof, by whatever name called, and including all clauses, riders, endorsements, and
papers attached thereto and made a part thereof.
Pollution Liability Coverage Form. Commercial form providing pollution insurance
on a "claims made" basis, and also including coverage for clean-up costs.
Premises. The particular location of property or a portion thereof as designated
in a policy.
Premises and Operations Liability Insurance. Liability coverage for exposures
arising out of a insured's premises and business operations.
Premium. The price of insurance protection for a specified risk for a specified
period of time.
Private Passenger Automobile. Four-wheeled motor vehicles of the private
passengers, station wagon or van type, designed for use on public highways and subject to
motor vehicle registration.
Pro Rata.
- Distribution of the amount of insurance under one policy among several objects or places
covered in proportion to their value or the amounts shown.
- Distribution of liability among several insurers having policies on a risk, usually in
the proportion that the amount of coverage in each policy bears to the total amount of
coverage in all policies.
Pro Rata Cancellation. The termination of an insurance contract or bond with the
premium charge being adjusted in proportion to the exact time the protection has been in
force.
Products and Completed Operations Insurance. A major general liability subline
which provides coverage for an insured against claims arising out of products sold,
manufactured, handled, or distributed, or operations which are complete.
Protection Class. The grading of fire protection, determined by the Grading
Schedule of Cities and Town, for a given area. This designation is used for all fire
rating except for dwellings, in which case the Dwelling Class is used.
Punitive Damages. Damages awarded over and above compensatory damages to punish
a negligent party because of wanton, reckless, or malicious acts or omissions.
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Radius of Operation. Usually used to determine rates for automobiles owned by a
business.
Robbery. The felonious taking, either by force or fear of force, of the personal
property of another.
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Self-Insured Retention (SIR). That portion of a risk or potential loss assumed by
an insured. It may be in the form of a deductible, self insurance, or no insurance.
Short Rate Cancellation. A cancellation procedure in which the premium returned
to the insured is not in direct proportion to the number of days remaining in the policy
period.
Slander. A spoken statement about someone which is personally injurious to the
individual.
Statement of Values. Sometimes property is written using a blanket rate and one
single limit of liability applying to all locations.
Strict Liability. Usually used when referring to Products coverage. The
liability that manufacturers and merchandisers may be subject to for defective products
sold by them, regardless of fault or negligence.
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Tenants Improvements and Betterments. Property affixed to an owner's building by
the lessee or tenant which may not be legally removed at the end of the rental period.
Termination. The time the coverage under an insurance policy ends, either
because its term has expired or because it has been cancelled by either party.
Theft. The act of stealing. It includes such acts as larceny, burglary, and
robbery.
Total Loss. A loss of sufficient size so that it can be said there is nothing
left of value. The complete destruction of property.
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Umbrella Liability Policy. A coverage basically affording high limit coverage in
excess of the limits of the primary policies as well as additional liability coverages.
Underinsured Motorists Coverage. A coverage in an Automobile Insurance policy
under which the insurer will pay damages up to specified limits for bodily injury damages,
if the limits of liability under the liable motorist's policy are exhausted and he cannot
pay the full amount he is liable for.
Uninsured Motorists Coverage. A coverage in an Automobile Insurance policy which
the insurer will pay damages to the insured for which another motorist is liable if that
motorist is unable to pay because he is uninsured.
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Valuable Papers and Records. An all-risk coverage for physical loss or damage to
valuable papers and records of the insured. It includes practically all types of printed
documents or records except money.
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Workers Compensation (WC).
- A schedule of benefits payable to an employee by his employer without regard to
liability, required by state law in the case of injury, disability, or death as a result
of occupational hazards.
- Insurance agreeing to pay Workers Compensation law benefits on behalf of the insured
employer.
