Clenney Insurance of Blakely
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Insurance Terms

Insurance Terms

A  |  B  |  C  |  D  |  E  |  F  |  G  |  H  |  I  |  J  |  K  |  L  |  M  |  N  |  O  |  P  |  Q  |  R  |  S  |  T  |  U  |  V  |  W  |  X  |  Y  |  Z

 

A

Actual Cash Value (ACV)

A way of valuing insured property; calculated by subtracting depreciation value from replacement cost.

Actuary

A business professional who deals with the financial impact of risk and security, provides assessments of the mathematical likelihood of events and outcomes to minimize losses, and recommends measures to minimize impact when losses do occur.

Additional Insured

A person or organization that receives the benefits of being insured in addition to the actual purchaser of the original insurance policy.

Agent (Insurance)

A person that is authorized to act on behalf of another to create a legal relationship with a third party – specifically an Insurance Agent acts to negotiate and service a legal insurance contract between the Insured and the Insurance Carrier.

Aggregate Limit

The total amount during a policy period which an insurance carrier will pay out on the policy holder’s behalf; equal to the maximum limit of liability.

All Risk Insurance

A policy covering all losses, except those specifically excluded in the policy terms.

Allied Lines 

A variety of related coverages associated with property insurance including, but not limited to coverage of; data processing equipment, water damage, malicious damage and vandalism, increased cost of construction, earthquakes, radioactive contamination, sprinkler leakage, standing timber.

Application (insurance)

A written or digital document completed by a person requesting insurance to provide information about the type, extent, and amount of insurance desired as well as information regarding the person, organization, and/or items to be insured.

Appraisal (insurance)

Valuation based on a comparison of equivalents to determine the monetary estimate for insured properties. The act of calculating the worth of an item or business for insurance purposes, often by a projection of cash flow from assets as well as future and current activities.

Arbitration

A legal technique used for the resolution of disputes outside of the court system. One or more impartial persons, referred to as “arbiters” or “arbitrators”, are appointed by both sides to decide the case on behalf of the parties involved. The decision is final and legally binding for both sides of a dispute and enforceable by law. It is often faster than the legal system as well as less expensive and usually non-public.

Attractive Nuisance

Hazardous object or condition on land (artificial hazard) that is likely to attract children unable to appreciate the risk posed by it.Often applies to abandoned cars, piles of lumber or sand, trampolines, and swimming pools, but can apply to virtually anything on a property. Warning signs do not mitigate liability in all cases, particularly when children cannot read the sign.

Audit (insurance)

Once a policy expires, an insurance company will do an evaluation of policy holder’s records to determine actual exposures and operations for the policy term (rather than the original Estimated exposures). This is used to decide the premium which should be paid to the insurance company.

Aviation Insurance

Coverage geared specifically to the operation of aircraft and the risks associated with aviation. Policies include appropriate terminology, limits, and clauses particular to aviation insurance.


B

Benefits (insurance)

The amount of money paid on behalf of a policy holder under the terms of a valid insurance policy to cover specific types of losses referred to in the policy.

Binder (insurance)

Temporary issuance of proof of insurance used by an agency to “bind” or cover the policyholder immediately for a specific time, usually until the formal policy is issued.

Blanket coverage

A blanket policy utilizes one limit for all coverages, and items/locations under the policy rather than each limit and location/item covered independantly.

Bodily Injury Liability

Insurance coverage for bodily injury in others for which the insured is deemed responsible. Designates how much coverage the policy holder has per person in an accident, not including employees, taking into account physical injuries, death, lost wages, etc. This type of coverage is required for drivers in most states.

Broker (insurance)

An insurance broker sells, solicits, or negotiates insurance for compensation and does not represent an insurance company as an agent does. Agents of more than one company are often referred to incorrectly as a broker.

Burglary

Often specifically defined by an insurance policy, the actual coverage can vary. Usually it is referring to illegal entry into a building for the purpose of committing an offense, most often theft. Housebreaking and Breaking and Entering are other synonyms for burglary.


C

Carrier (insurance)

The insurance company that issues the policy and assumes or“carries” the risk and responsibilities associated with the policy.

Casualty Insurance

Used to describe the liability coverage of an individual or organization for negligent acts or omissions, but not directly concerned with Life, Health, or Property insurance. This is a somewhat elastic term and can depend upon the specific policy, but can often cover such things as aviation related property insurance, glass insurance, crime insurance, boiler & machinery insurance, marine losses due to shipwreck and losses at sea or fidelity and surety insurance, earthquake, political risk, terrorism, forgery, fidelity and surety bonds, livestock, and legal expenses. Automobile insurance is the most common form of casualty insurance.

Catastrophe Insurance

Coverage for extremely large scale disasters, often resulting in high losses including loss of life and extensive property damage. This refers to natural disasters such as ice storms, hurricanes, tsunami, flood,and earthquake, as well as man-made disasters such as terrorism, depending on the policy specifics. These events are usually excluded from standard hazard insurance and so require their own policy.

Certificate of Insurance

A document which provides proof that insurance has been purchased by the policyholder and which can then be presented to other parties. It is not a substitute for the actual policy. Also referred to as an Insurance Certificate.

Chartered Property Casualty Underwriter (CPCU)

Considered to be the premier designation in the insurance industry and administered by the American Institute for Chartered Property and Casualty Underwriters. CPCU designation requires the completion of nine (9) graduate and post graduate courses as well as passing of nine (9) extensive national examinations in various specified areas. CPCU designees are bound by a Code of Ethics and must meet experience requirements outlined. Designees have a professional society called the Chartered Property and Casualty Underwriters Society with over 150 chapters in the United States.

Claim (insurance)

Formal notification to an insurance company requesting payment of estimated or actual amount of loss due under the terms of a policy. Claims are reviewed by the insurance company for validity and paid to the appropriate party once approved.

Claim Severity

The total amount paid out for all claims divided by the number of claims. Also called Average Cost Per Claim.

Classification or Class (insurance)

Grouping of persons, operations, or property with similar general characteristics whichare rated based on a number of statistical factors to determine risk and appropriate insurance rates.

Co-insurance

(a) The joint assumption of risk between the insurer and the insured, where the insured received a reduced rate for insurance equal to a percentage of the actual value of the property insured. (b) The sharing of risks between two or more title insurance companies.

Commercial Lines

Insurance policies designated for and purchased by businesses.

Commercial Multiple-Line Policy

A broad coverage policy package geared toward businesses, including various liability and property coverage.

Comparative Negligence

A rule of law applied to determine responsibility and damages based on negligence of every party involved in an accident.

Competitive State Fund (insurance)

An organization created by a state to sell workers' compensation insurance in competition with other private insurers.

Compulsory auto liability insurance

Nearly all states require registered vehicles to carry a minimum amount, which varies by state, of auto liability insurance to drive a car, covering the other driver’s medical, repair, and any additional costs associated with an accident.

Concealment (insurance)

The act of intentionally withholding information, which results in the voiding of an insurance claim, even if the insured is not specifically asked about it. The failure to disclose pertinent facts prior to the instatement of an insurance contract.

Consequential Loss

Loss accompanying an insured loss but not directly associated with it, such as loss of income to a business after flooding. These losses are not usually covered by normal insurance policies unless specifically indicated and usually accompany payment of an additional premium. Also called Indirect Loss.

Contract (insurance)

The insurance policy received by an insured from the insurer which details the extent coverage, conditions, and circumstances under which the policyholder will be compensated financially.

Contributory Negligence

Common law referring to a case where an individual is responsible in part for injuries or damages due to their own actions, often resulting in a reduction of financial compensation.

Coverage (insurance)

The total type and amount of insurance purchased by the policy holder against certain losses as described in the specific policy.


D

Declarations (insurance)

Part of an insurance policy which explicitly states the policyholder’s information, any property insured and its description, premiums, policy period, and any other supplemental information. Often refers to the actual page of a policy that contains such information and outlines the coverage under the policy.

Deductible

Specified amount for which the insured is responsible and must pay out of pocket before an insurance company begins to pay claims against the policy.

Depreciation

Reduction in value of an asset over its useful lifespan, taking into account average useful life, wear, tear, and obsolescence which insurance companies use to estimate the actual current value of an asset.

Direct Writer

Insurance company through which a policyholder directly insures their property and which sells policies directly to the public using their own employees or dedicated agents.

Dividend

Also called Policy Dividends. “Return of premium”, refund, or payment to the insured if the insurers fiscal year is positive. Usually paid annually to cash value life insurance policy holders and disability income insurance policy holders. This amount is based on a number of factors, which result in the insurance company choosing to share a surplus with their customers. The dividend could also be paid out to stockholders rather than to the insured.


E

Earned premium

The amount of a premium that applies to the expired part of a period a policy covers. The part of a premium considered to apply to coverage and protection already given on a policy.

Employer’s liability insurance

Additional coverage which can be purchased by employers in conjunction with workers’ compensation which protects their assets in cases where workers’ compensation will not cover, such as in cases where the cause is not negligence but is still the result of work.

Endorsement

Amendment or alteration of an insurance policy, usually by a written document attached to the policy. The policy can be expanded or limited by the endorsement and the endorsement can cause a premium to increase or decrease depending on the changes.

Exclusion

A statement within the insurance policy restricting the coverage in some way or eliminating coverage under certain conditions or circumstances. For example, “family” restrictions in an auto policy require that the person meet certain criteria, such as being related directly by blood, adoption, or marriage and a resident of the same household.

Exposure

The possibility of losses and accidents, the extent of which is measured by area or surroundings, receipts, payroll, and other factors. This can assist insurance companies in identifying individuals and businesses at higher risk of loss than others. 


F

FAIR Plan (Fair Access to Insurance Requirements)

Guaranteed individual and business insurance coverage plan instituted by the federal government for those who cannot purchase property insurance in the free market, usually those in high risk areas. FAIR plan insurers will work with the applicant and suggest improvements to the property if the property does not meet FAIR plan standards.

Fidelity Bond

A type of insurance for employers to protect against monetary or physical losses caused by employees, either through fraudulent acts, dishonesty, theft, embezzlement, fraudulent trading, or forgery.

Fiduciary

A legally appointed individual, association, or corporation who has been placed in a position of confidence and trust to manage assets, properties, and money of another party, usually with legal rights and duties to make decisions on behalf of the party they represent.

Financial Responsibility Law

A state law which requires that the automobile drivers provide proof of financial ability to pay a minimum amount of automobile accident related loss and damages, usually by purchasing an auto liability insurance policy of the required state amount.

Fire Insurance

Insurance policy for the protection against fire related loss and damages. This usually covers fire from any cause, including lightning, and is often part of a homeowner’s policy or multiple peril commercial policy.

Fleet Policy

A type of business insurance which provides protection for many vehicles, usually five (5) or more, referring to the vehicles as a “fleet”. Often used in trucking, limousine, and similar industries.

Floater Policy

Coverage for assets being moved from one location to another and providing protection from transportation perils, regardless of the asset’s location.

Flood Insurance

An insurance policy providing protection for property owners against loss and damages that are the direct result of flood and associated water damage. Flood insurance is provided in a separate policy from homeowner’s insurance.


G, H, I

Grace Period

An additional period of time beyond the premium due date during which a policy is effective. A provision on most insurance contracts which  an insurance policy carrier provides to a policyholder to make a payment without penalty or interruption of service for a period of time beyond payment due date.

Hazard

A condition or situation which increases or creates the statistical probability of damages or loss.

Hazard Insurance

Protection and coverage for damages to a property due to catastrophic events specifically named in the policy.

Incurred Losses

Losses which have been acquired during a specific time period, but not necessarily paid out during this time period

Insured

Group, organization, or individual covered by the terms of an insurance policy. The state of having insurance.


J, K, L

Joint Underwriting Association (JUA)

A group of insurance companies which is used to provide insurance coverage to persons unable to purchase coverage on the free market, usually due to a greater risk of loss is involved with the insured. The insured often has to pay for assessments, which covers the losses of the association.

Liability Limits

The maximum monetary amount an insurance policy will cover in the event of loss or damages. There is often a per person limit and a combined total limit for all damages.

Litigation

To carry out a legal action or engage in legal proceedings in a court of law.

Loss

Damages or injury covered under an insurance policy which can be the basis of a claim.

Loss Ratio

The ratio of claims settled by the insurance company in comparison to premiums paid to the insurance company during a specific period, usually one year.


M

Malicious Mischief

The willful and intentional damage or vandalism of personal property belonging to others due to ill will toward the property owner.

Multi-Peril Policy

A property insurance policy incorporating several types of coverage, including but not limited to; fire, hazard, flood, earthquake, casualty, public liability. This is not the same as Multiple Protection Insurance.

Multiple Line policy

A type of insurance policy combining a number of risks into a single policy, such as property and liability.

Mutual Insurance Companies

An insurance company where policy holders share losses and profits amongst themselves.


N

Named Perils

An insurance policy, usually homeowners, which provides coverage only for events explicitly stated in the policy, such as hurricanes, burglary, tornado, and fire. Named Peril Insurance covers the most likely events and is less expensive than comprehensive insurance, which covers a broader range of events, but not all. Named Peril insurance can be used to supplement a Comprehensive Insurance policy.

Negligence

Actions and conduct which is less than what a reasonable person would do to protect others from foreseeable injury and risk, or which falls below the expected standard behavior specified by law, whether by committing an act or failing to inform others of a known danger.

No-Fault Automobile Insurance

A type of auto insurance required by some states, in which a driver’s insurance covers their own damages, losses, and injuries, regardless of who is found to be or considered to be at fault for a particular automobile accident.

Notice of Loss

Official notification, usually required in writing, informing an insurance company immediately after a loss or accident that it has occurred and that you have suffered a loss covered by a policy with them. This notice must be filed and filed in a timely manner for the insurance company to process a loss on a policy. Also called a First Report or Claim Report


O, P, Q

Occurrence (insurance)

An event or exposure to conditions that triggers coverage under an insurance policy. Some policies consider an occurrence to be continuous or repeated exposure resulting in harm or losses that is unintended and unexpected, therefore the “occurence” can cover continuous events and not just accidents.

Package Policy

Several types of insurance coverage from different insurance lines included under a single policy.

Peril (insurance)

Cause of loss. Exposure to a risk or hazard that can cause injury, damages, or loss. Risk or hazard against which a policyholder is protected under the terms of their insurance policy.

Policyholder

Group, organization, or individual who owns the insurance policy, in whose name the policy is written, and who has the rights to exercise privileges of the insurance contract. This is usually, but not always, the same as the insured covered by the terms of an insurance policy.

Pool (insurance)

A group of small businesses who join together to receive better insurance coverage plans and better rates by combining the risks of a larger number of businesses and individuals and their increased buying power.Often referred to as Insurance Purchasing Cooperatives.

Premises (insurance)

Land and improvements on it, such as buildings or stores, or a portion of it specifically described in the insurance contract which the insurance policy covers in cases of damage or loss.

Proximate Cause

An act which is the main cause of an injury or loss and without which the injury or loss would not have occurred. A cause which is considered by law to result in liability. Often uses the “but for” test: But for event X, event Y would not have happened.

Quote (insurance)

Statement of the current cost of a specified insurance policy by an insurance agent or insurance agency.


R

Rate (insurance)

The amount charged for an insurance policy reflecting the possibility of loss for the risks covered by the insurance company under that policy. This is used as a basis to determine the premium and is often used interchangeably with the term premium.

Rating Bureau

Organization made up of insurance companies which classifies rates and hazards of risks using statistical data such as geographic location.

Rating Territory

A geographic grouping where similar hazards tend to exist that allows a similar rate to those in the specified area and which can help to balance the risks of insurance policies. These can be defined differently by each insurance company.

Reinsurance

A practice where portions of the risk of an insurance policy are assumed by or transferred to a number of companies to help spread out the payment of damages in the case of a large loss. This helps protect the insurance company in such a case.

Rental Value Insurance

A type of property insurance intended for landlords or owners which covers loss of rental income caused by a peril for which they are specifically insured. It can also cover cases where a rental is owner occupied.

Replacement Cost Insurance

This type of insurance reimburses the policyholder for the value of the property or items as if it was new, versus the usual deprecated value. Also called Replacement Cost Property Insurance.

Replacement Cost Contents Insurance

A policy reimbursing the policyholder for the damaged contents of a home or apartment as new rather than deprecated.

Replacement Cost Dwelling insurance

A policy reimbursing the policyholder for the cost of damaged property as new rather than deprecated.

Reserve (insurance)

A specified amount of funds that an insurer must have set aside to meet insurance obligations and payments as needed. Claims Reserve is the amount which is already spoken for and must be settled at a future date.

Retrospective Rating

Calculation of the current year’s policy cost based on the actual current year’s losses, subject to agreed upon maximum and minimum amounts.

Rider

Part of an insurance policy, included as an addendum, which is purchased separately from the policy and alters or modifies the policy coverage in some way.

Risk

In the insurance industry, this term is used to refer to a thing or person which is insured by a policy.

Risk Control Service

A service for the evaluation of a policy holder’s chances for loss which offers suggestions on how to mitigate or remove potential for those losses.

Risk Management

A practice where an organization ensures that they do not assume an unacceptable level of risk, by analyzing exposure to risk and take steps to reduce and control such exposure.


S

Salvage 

Damaged property taken by an insurer after it has paid the claim in order to minimize its losses. 

Schedule 

An enumeration of various properties covered by a policy. A system for computing rates. 

Self-insurance 

An individual or firm’s systematic provision of a fund to provide for all or part of its losses. 

Short rate cancellation 

The termination of an insurance policy or bond before its expiration either by the insured or the company. The notice necessary before such cancellation becomes effective is almost always stated in the insurance contract. 

Standard provisions 

Those clauses that certain state codes prescribe as being inserted in contracts of insurance; Contract provisions in general used by insurers, adopted by a group of insurers, approved by a state insurance department, or required by statute, either literally, in substance, or in a form more favorable to the insured. 

Stock company 

A company owned by a number of investors or stockholders. 

Subrogation 

The right of the insurance company to recover from a third party the amount paid under the policy.

 

Surety bond 

An instrument providing for monetary compensation should there be a failure to perform any specific acts within a stated period. 

Suretyship 

All forms of obligations to pay the debt or default of another. The function of being a surety. 

Surplus line 

Business which would otherwise be subject to regulation as to rates or coverage, placed in non-admitted markets on an unregulated basis in accordance with the Surplus or Excess Line provisions of state insurance laws. 

Syndicate 

Group of companies or other underwriters who join together to insure a certain property which may be of such value, or of such high hazard, or so expensive to underwrite that it can be done more efficiently on a cooperative basis.


T, U, V

Theft Insurance

Insurance coverage for personal asset losses related to theft or burglary, often covering losses to exterior of the business due to forced entry.

Tort

An act which is not necessarily illegal but unfairly causes someone else harm or loss, not including breach of contract.

Underwriter

A person or firm in the insurance business who evaluates the acceptability of insurance risks in exchange for a fee or premium, who decides the appropriate amounts for the fee, and the appropriate terms to accept the risk. They decide who and what an insurance company will insure, as well as the specifications of the policy.

Underwriting Profit

The profit remaining on an insurance policy after losses and overhead have been paid, and not including investment income on premiums, prior to federal income tax. Also called Underwriting Gain.


W, X, Y, Z

Waiver (insurance)

Provision in an insurance policy which removes a party’s ability or right, such as to further legal action, and removes a liability for the other party. There is often a clause in insurance policies stating that the policy holder is not required to pay premiums if they become disabled or seriously ill. Often referred to as a Waiver of Premium.

Weather Derivative

Insurance product that can be used by individuals or organizations to reduce the risks associated with unforeseen and negatively effecting weather conditions. This can be very different on a situation to situation basis; insurance against warm winters for a ski area or protection against low turnout for tourist destinations on rainy weekends during peak times.

Whole Life Insurance

Unlike term life insurance, whole life insurance remains in force for the life of the insured. Upon the insureds death, the beneficiary receives the cash benefit. Premiums often have to be paid into the policy on a yearly basis.

Workers’ Compensation

Insurance covering employees injured on the job, providing medical benefits, and wage replacement in exchange for mandatory waiving of the right to sue the employer for negligence. Each state has its own standards required for the amount and type of coverage needed for Workers Compensation. Also called Workers’ CompWorker’s CompensationWorkers CompensationWorkman’s Compensation.

Write (insurance)

The accepting of an application for insurance by an insurance company. The completion of the contract and actual creation of the binding insurance relationship. To underwrite a policy or agree to the policy terms on the part of the insurance company.

Yearly Renewable Term (YRT) Reinsurance

A type of life insurance that is a one year term life policy where the premium is increased on a yearly basis due to increase in age and risk of the insured. Also called Annual Renewal Term Insurance and Increasing Premium Term Insurance.

Zero First Year YRT

A Yearly Renewable Term (YRT) without a first year premium.