For your convenience, below we have listed many of the common terms used in the insurance industry. We have put them in alphabetical order so we suggest using the slider bar on the right to navigate up and down to the desired section. These definitions are general in nature and do not replace any clauses in your insurance policy. If you still have any questions, it always helps to talk to one of the professionals at the Glen Furr Agency. Feel free to give us a call: (765)795-4413 or toll-free (866)795-4413.
AAIS--American Association of Insurance Services
The rating bureau for inland marine, aircraft hull and package insurance fields for insurers choosing to participate. Formerly Transportation Insurance Rating Bureau. Headquarters: Bensenville, IL.
AAMGA--American Association of Managing General Agents
A trade association of independent insurance general agents serving the interests of insurance companies and local agents. Provides markets for all types of insurance with emphasis on surplus and specialty lines. Established in 1926. Headquarters: Washington, DC.
Abutting Coverage
Two or more insurance policies with consecutive policy periods providing common insurance to an insured.
Accelerated Endowment Option
With respect to life insurance, some policies will offer an option to convert the policy into an endowment before its normal or set maturity date by using the accumulated policy dividends for this purpose.
Accept
The taking of risk (by an insurer or other person authorized to act for that insurer, such as an underwriter) by expressing a willingness to issue insurance. Also known as assume.
Accident
An event or occurrence that is unintended, unforeseen, and unexpected; something which could not be considered as a foreseeable occurrence and consequence of an undertaking; a casualty or mishap
Accident Experience
1) A summary of claims activity, which details the insured's frequency of accident to a selected unit of measurement, thus making the loss experience more meaningful. 2) In workers compensation insurance, the rate of disabling injuries, number of lost work days due to accidents, or the number of first-aid cases are among items that may be considered in an accident experience.
Accident Prevention
All the ways and means used to avoid the occurrence of an accident or to reduce its consequences if it does occur, such as the control of personal performance, machine performance, and physical environment, including the training needed to reduce the number of accidents and cost of accidental injuries. Accident prevention is one of the less publicized functions of risk managers and insurers, many of which improve safety in industry, the home, and on the roads through safety engineering and research. Also called loss prevention, safety engineering, accident control, or loss prevention.
Accident Report
Either the report that is used to document the time, cause, results, injuries, parties, and other pertinent facts of an accident for insurance purposes or a similar type of report prepared by law enforcement persons as a result of an accident.
Accidental Death
Any death that results from causes other than natural causes or homicide.
Accidental Death Benefit
Some life insurance policies have provisions that provide for an additional benefit payment in the case of an accidental death. (See double indemnity and multiple indemnity.)
Accidental Death and Dismemberment Insurance (AD&D)
A specific type of life insurance policy that pays benefits in the case of the death or dismemberment of the insured from accidental causes. If dismemberment occurs, benefits are paid on a periodic basis, such as weekly, bi-weekly or monthly for the injury; and the amount of payment of the benefits is based on the type and severity of the dismemberment.
Accidental Death Insurance
A life insurance policy that pays a benefit only in the event that death was accidental.
Accidental Occurrence
Injury or damage that is caused by an accidentally occurring accident, incident, event or series of events that is unexpected and unforeseen.
Accounts Receivable Insurance
Coverage that protects businesses against their inability to collect their accounts receivable because of the loss of supporting records that have been destroyed by a covered cause of loss. Also covered are the extra collection expenses that are incurred because of such loss or damage and other reasonable expenses incurred to re-establish records of accounts receivable after loss or damage
Accumulation
This is a life insurance term that reflects the increase in value and, therefore, the subsequent benefits available for payouts as the life of the policy progresses and the premiums paid into the policy have a chance to accumulate and earn income for the insurer.
Accumulation Period
With respect to health and medical insurance policies, it normally refers to the amount of time within each policy period that is available to the insured to satisfy the deductible amounts
Accumulation Value
Specifically applicable to universal life insurance policies, this term is used to express the sum total of all the premiums paid and interest accrued without regard for deductions made for benefits, expenses, etc.
Actual Cash Value
The basis of loss settlement in property insurance policies, which takes into consideration factors such as replacement value less depreciation, market value, rental value, the use of the building, the area in which it is located, obsolescence, assessed valuation, and any other factor that would have an effect upon the value. A working rule-of-thumb definition, however, is "replacement cost new at the time of loss, less depreciation." (See replacement cost insurance.)
Actuary
A social mathematician who uses mathematical skills to define, analyze and solve complex business and social problems involving insurance and employee benefit programs. The work of actuaries involves the various contingencies that face human beings: birth, marriage, sickness, accident, loss of property, legal liability, retirement and death, and the financial effects which these and other contingencies have on various insurance and benefit programs. Many of these programs involve long-range financial obligations, for which actuarial forecasts are fundamental in maintaining a sound financial basis: rate-making, premium and loss reserving, investment valuation, pension benefits, and insurance statistics, among others.
Additional Death Benefit
Life insurance benefits offered should death occur during a specific time period or as a result of specific causes.
Additional Insured
A person, other than the named insured, who is protected by the terms of the policy. Usually a specified individual such as a spouse or a member of the insured's family but sometimes, as in automobile insurance, any person, provided that person is driving the insured vehicle with the insured's permission.
Additional Living Expense Insurance
Insurance for the extra amount it costs an insured to live until repairs are made to the insured's dwelling.
Additional Named Insured
A party, other than the first named insured, that has been shown as an insured in the policy Declarations or in an addendum to the policy Declarations or by endorsement once the policy has been issued. This party has the status of named insured
Additional Premium
When a policy has been issued subject to rate, audit, inspection; is assessable; or when the policy is endorsed; the additional premium is the extra amount due, over and above the initial premium stated in the Declarations. Such premium is charged for increased exposures, retrospective rate calculations, additional coverage, or premium audit.
Adhesion Contract
A type of contract in which the conditions of the contract are drawn or written by the insurer with no input from the insured who must adhere to the terms and conditions as set forth, and who has little recourse to negotiate for better benefits or terms. If there is any ambiguity when a contract of adhesion has been written, court decisions and rulings will be in favor of the party who did not have control of the wording of the provisions; in this case the insured.
Adjacent
One building is adjacent to another if it is very close to another building although not actually touching it, with no intervening building.
Adjoining
When a building is so located that it touches another building
Adjuster
One who determines the amount of loss suffered. A "company" adjuster represents the company. A "public" adjuster represents the policyholder. An "independent" adjuster may be hired by either
Admitted Company
A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted insurer.
Adverse Selection
The insuring of one or more risks with a higher chance of loss than that contemplated by the applicable insurance rate. The selection of such risks is adverse because the rate is inadequate. Also called anti-selection
Adverse Underwriting Decision
Any underwriting decision that either rejects the request for coverage or offers coverage that is less than what was originally requested. It includes decisions that in any way restrict or limit coverage, call for higher pricing or increased deductibles, apply substandard classifications or places in residual markets, or assign risk pools or state pools.
Agent of Record
The agent who has been recognized by the insured or customer as his or her authorized representative for handling the specified insurance transactions.
Agent's Authority
The authority that has been legally granted to an agent in the agency contract between the agent and insurer
Aggregate Limit
In a policy providing such an aggregate limit, the maximum amount the insurer will pay during the policy period, irrespective of the policy's limit of liability.
Agreed Amount
The amount of coverage that the insurer and insured have mutually agreed to be the value of the property at the time the insurance is purchased
Agreed Amount Clause
A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured's maintaining insurance equal to the amount agreed upon at the inception of the policy.
Agreed Value
An agreement made between the insurer and insured at policy inception confirming that both parties concur that the limit of insurance set forth in the schedule of property is that item's value, and that agreed upon value is the amount that will be paid by the insurer in the event of a total loss.
Agreed Value Clause
A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured's maintaining insurance for the scheduled item, equal to the value agreed upon at the inception of the policy.
AIA--American Insurance Association
A trade association of primarily stock property and casualty insurers that performs numerous functions, such as fire and accident prevention, reviews of insurance legislation, research, setting of building and fire department standards, arson and fraudulent claims investigations, etc. Headquarters: Washington, DC.
All-risk Policy
A policy that covers loss caused by any cause of loss which is not excluded, as contrasted to "named peril" policies which protect against certain perils named in the policies. Usual to certain types of property and marine insurance contracts, the term "all risk" frequently appears in quotes, since such coverage includes "almost" all risks (i.e., all but those excluded).
Amortization
Periodical write-down of premium paid on purchase of a bond or write-up of discount received on purchase of a bond so as to reach par value at maturity date.
Amortized Value
The current appraised worth of any bond not yet matured and which was either bought at a discount (less than its face value) or at a premium (more than its face value). For example, a bond bought today at $1,050 to mature in 10 years would have an amortized value one year hence of $1,045, two years hence of $1,040, etc.
Anniversary Date
The anniversary date of policy inception as listed in the policy Declarations, and each subsequent expiration and renewal.
Annuitant
The owner or beneficiary of an annuity.
Annuity
A popular device used in retirement planning, it refers to any type of periodic (generally monthly) payments made to an individual (called the annuitant). The payments may be arranged to last for a defined period of time or may be paid until the annuitant's death. In the latter case, remaining funds may continue to a new annuitant or be paid in a lump sum to a beneficiary.
Annuity Certain
An annuity that guarantees to pay income for a specified period of time, whether or not the annuitant is still alive.
Annuity Period
With respect to the scheduled payments of income for an annuity, this is the amount of time between each payment.
Application
In all types of insurance requiring it, a written statement by a prospective policyholder which gives the information the company relies upon when underwriting, rating and issuing the insurance. In England this is called a proposal.
Appointment
The process by which an insurance company authorizes an agent to act on that company's behalf.
Appraisal
Valuation of property.
Appurtenant Structures
Other structures or real property of lesser value that are located on the same premises as the main building insured under a property insurance policy. Common examples are small metal service buildings or storage sheds.
Assigned Risk Plan
An association of insurers in a given state in which automobile risks unable to get insurance in the voluntary market are shared among subscribing insurers in proportion to the amount of automobile liability insurance each insurer writes in that state. All companies writing this class are required to participate in this activity, currently administered by the Automobile Insurance Plans Service Office, headquartered at Johnston, RI. Also known as automobile insurance plans, these plans sometimes take the form of joint underwriting associations.
Assumed Liability
Contractual liability which arises from an agreement between people, as opposed to liability which arises from common or statute law.
Attachment
An attachment is a rider, endorsement, or any other modification made to a policy that in some way changes, broadens, restricts or clarifies the basic coverage provided. (See rider, and endorsement.)
Audit
Verification of books or accounts to determine their accuracy. Certain policies written on a reporting or adjustable form give the insurer the privilege of auditing the policyholder's records to verify the accuracy of the premiums paid.
Automobile Liability Insurance
Protection for loss incurred through legal liability for bodily injury and damage to property of others caused by accidents arising out of ownership, maintenance or use of an automobile.
Automobile Medical Payments Insurance
An optional coverage under an automobile liability policy which pays the medical expenses of the policyholder and any of the passengers injured by the insured automobile, irrespective of who was responsible for the accident. This was originally called "basic medical payments." In addition, it pays the medical expenses of the policyholder and members of the immediate family injured while passengers in any other automobile or when struck by an automobile. In some no-fault states, medical payments insurance has been replaced by personal injury protection (PIP); in other states, it may supplement no-fault insurance. (See personal injury protection (PIP).)
Automobile Physical Damage Insurance
Material damage insurance covering loss or damage to the policyholder's automobile.
Attained Age
The age of the insured today.
Basic Form Cause of Loss
Property insurance covering only those causes of loss (perils) specified as covered. The types of losses insured are fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.
Beneficiary
The person or entity named in a life insurance policy to receive the proceeds.
Binding Authority
When one party (usually an agent) has been given the right and commensurate authority to represent another party (usually an insurer) in effecting or creating an insurance contract.
Blanket Coverage
1) In property insurance, a single limit of insurance that covers a number of items, such as one amount of insurance to cover two buildings or a single building and its contents. A blanket policy usually contains certain restrictions, which may be absent in "specific" or "itemized" policies, such as the use of a 90% coinsurance clause. 2) In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).
Bobtail Coverage
Auto liability coverage that protects against losses involving trucks while being operated without a trailer (typically occurs after a trailer has been delivered or for cabs traveling to pick up a trailer, prior to its delivery).
Broad Form Cause of Loss
Property coverage providing protection for loss from a specified group of causes including all of those provided in the basic cause of loss form (fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action) plus additions which include breakage of glass, falling objects, weight of ice, sleet, or snow, water damage, and collapse as defined in the cause of loss form.
Burglary
Theft by forcible and illegal entry, evidenced by visible signs made by tools, explosives, electricity or chemicals.
Business Auto Policy
Coverage designed to provide a "standard" form for insuring commercial vehicles (other than private passenger cars).
Business Income Insurance
A time element coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. Extra expenses incurred to continue operations at another location are included as long as they reduce the total amount of loss. (See gross earnings form, use and occupancy, and business interruption insurance.)
Business Interruption Insurance
A time element coverage which pays for loss of earnings when business operations are curtailed or suspended due to property loss as a result of an insured cause of loss. This coverage is now obsolete and has been replaced by a more comprehensive and generic business income insurance. (See time element insurance and business income insurance.)
Cancel
To terminate a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.
Cancellation Notice
The notice issued by one party of the policy to the other, informing of the intent and request to cancel. The policy provisions must be followed during the notification process with respect to how the notice must be given (normally in writing), the number of days that must be allowed, and how the notice must be delivered (registered mail, delivery, etc.).
Captive Agent
An agent who, by contract, represents only one company and its affiliates. Sometimes called an exclusive agent.
Care, Custody or Control
Most liability policies have provisions that exclude coverage for physical damage or loss to property while it is in the care, custody or control of the insured. Two methods are available to buy back some or all of the care, custody or control coverage: either endorsements to the liability policy, such as the broad form property damage endorsement or its company-specific equivalent which will provide limited coverage, or the purchase of inland marine coverages such as bailees' forms. (See broad form property damage endorsement.)
Cargo
Goods being transported by rail, plane, truck, ship, or other conveyance, excluding the equipment needed to operate the conveyor.
Cargo Insurance
A generic term used in both inland marine and ocean marine insurance to designate the types of insurance available to provide coverage for cargo that is being transported by truck, rail, air, ship or boat.
Cash Value
The amount that a life insurance policy will pay the insured if the policy is terminated or canceled prior to maturity. The cash value is the amount the insured is entitled to, as stated in the policy, based upon time in the policy, limits and payments. The amount of cash the insured will receive may be reduced by a surrender fee, any outstanding loans, and applicable interest.
Casualty Insurance
Insurance concerned with legal liability for personal injuries or damage to property of others, including many other types of insurance, such as workers compensation, plate glass, burglary, boiler and machinery, aviation, etc. "Casualty" is generally accepted to cover all classes outside the definition of "property insurance," so that a property and casualty company would tend to handle all forms of insurance other than life.
Cause of Loss
Previously called "peril," this is the actual type of event that causes the loss. Examples are: theft, collision, earthquake, flood, fire or mischief.
Certificate of Insurance
A short-form documentation of an insurance policy.
Certificate Holder
The individual or business that requests and receives written verification of insurance coverage on an individual or business. The insurance company issues the certificate of insurance.
CGL--Commercial General Liability Policy
The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.
Change in Occupancy or Use
A provision contained in some property or casualty policies which requires the insured to inform the insurer of any change in occupancy or use of the premises. This allows the insurer to re-rate or add the necessary conditions or exclusions when the change adversely changes the exposures covered. Should the insured not comply and the change increases the hazard to the insurer, some states allow the insurer the option to cancel or void the policy.
Chartered Life Underwriter (CLU)
Chartered Life Underwriter designations sponsored by The American College. Headquarters: Bryn Mawr, PA.
CIC--Certified Insurance Counselor
A professional insurance designation designed originally for agents and brokers but now available to all types of insurance professionals who wish to pursue the intensive workshops, seminars and testing program covering a variety of commercial and personal insurance issues. The ultimate goal is a comprehensive understanding of the insurance needs and coverages available to meet the needs of clients. In order to keep this designation active, the CIC must complete update studies at set, periodic intervals. Sponsored by: Society of Certified Insurance Counselors, 3630 N. Hills Dr., P.O. Box 27027, Austin, TX 78755-1027, phone: (512) 345- 7932
Claim
1) The formal request by a policyholder or a claimant for payment of loss under an insurance policy. 2) The final amount made in payment of a covered loss.
Claim Department
The personnel of an insurance company dealing with losses or claims. In casualty operations it is a "claim" department, in fire operations, a "loss" department. As the property and liability business develops more on a multiline basis, these distinctions are rapidly disappearing. (See loss department.)
Claimant
One who presents a claim or one who has suffered a collectible loss.
Claims Adjustment
The process of handling and settling claims or the amount requested by a policyholder or claimant because of a loss or damages suffered.
Claims Reserve
An estimate of the amount an insurance company expects to pay for reported and estimated claims. This may include amounts for loss adjustment expenses. In an insurance company's financial statement, it includes losses incurred but not reported, losses due but not yet paid, and amount not yet due.
Claims-Made
A liability insurance method covering losses from claims asserted against the insured during the policy period, regardless of whether the liability-imposing causes occurred during or prior to the policy period. (However, many underwriters may not cover liability-imposing causes occurring prior to the policy period.) The coverage trigger is based on the retroactive date stated in the Declarations.
COBRA--Consolidated Omnibus Budget Reconciliation Act of 1985
A federal act making provision for the continuation of an employee's health insurance coverage, as well as the coverage for dependents, should the employee terminate his or her employment. This act is in effect whether or not the termination was voluntary. Further, it applies to employer-sponsored group health plans with 20 or more employees.
Coinsurance Clause
1) In property insurance, a clause requiring the insured to maintain insurance at least equal to stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, that proportion of the loss will be paid which the amount of insurance carried bears to the amount which should have been carried. Symbolically: Insurance Carried x Loss = Payment (subject to policy limit) Insurance Required 2) In major medical insurance, the clause that specifies the percentage of a loss which the company will pay and the percentage which the insured will bear (e.g., 8020, 7525).
Collision Damage Waiver
When renting an automobile or other vehicle from a rental agency, the rental agreement between renter and rental agency may contain an option allowing the renter to pay an additional fee in exchange for the agreement by the rental agency to waive its rights to collect any collision losses to the vehicle from the renter.
Collision Insurance
Coverage for the loss resulting from the striking of another object by a moving vehicle.
Comparative Negligence
A more modern system of allocating damages between two or more persons than the method of contributory negligence, which remains effective in many states (under which one cannot collect damages for bodily injury or property damage caused by another party's negligence if one were oneself in any way negligent). Under comparative negligence, the damages collectible in relation to another person are diminished in proportion to one's degree of negligence. In most instances, damages cannot be collected at all if the claimant's negligence was greater than that of the other party. Currently, in a few instances, the courts have awarded both parties damages as a percent of the total damages, depending on respective degrees of fault. (See contributory negligence.)
Compensatory Damages
Not to be confused with punitive damages, which are additional damages requested by an injured party to punish the party responsible for the loss. Compensatory damages are normally monetary damages alleged by the claimant to compensate for actual injuries or expenses sustained. These may include all types of medical expenses, as well as other expenses such as lost wages, legal fees, pain and suffering, mental anguish, loss of consortium, etc.
Completed Operations Coverage
Protection for a business which sells service instead of products against liability claims arising out of work completed away from the business premises. Differs from products liability coverage, which protects against products liability claims.
Concealment
In insurance, failure to disclose a material fact which may void an insurance policy.
Contingent Beneficiary
The party designated to receive the benefits or proceeds of a life insurance policy or retirement plan, should the primary beneficiary die.
Contract Bond
In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond.
Contractors' Equipment
Equipment used by contractors in their business operations. Examples may be anything from concrete forms, asphalt plants, bulldozers, cherrypickers, and scaffolding, to small hand tools. This equipment is most often protected by inland marine insurance coverages due to its mobile nature.
Contractors' Equipment Floater
An inland marine form which insures the equipment, tools and materials of a contractor.
Contractual Liability
A legal obligation voluntarily assumed under the terms of a contract, as distinguished from liability imposed by the law (legal liability).
Coordination of Benefits (COB)
In health insurance, policy provisions used by insurers to avoid duplicate payment for losses insured under more than one insurance policy (e.g., automobile or health) by making one of the insurers the primary payer, assuring that no more than 100% of the costs are covered and preventing the claimant from making a profit.
Copayment
A flat, preset fee paid by an insured for office visits, drugs, and other medical services as member of an HMO or preferred provider service. These copayments are normally a small fraction of the overall cost and act much like a service charge or handling fee.
Countersignature
1) An additional signature placed on a policy by an authorized person at the time it is issued, supplementing any other signature appearing on the printed form used for the policy. 2) When used to describe a countersignature law, the signature which must be obtained from an authorized person (usually a licensed agent or broker in a state having such a law) on a policy covering property in that state, but written by a party outside the state.
CPCU--Chartered Property Casualty Underwriter
The professional designation conferred by the American Institute for Property and Liability Underwriters.
CPP (Commercial Package Policy)
A package policy designed for commercial insureds that can provide in one policy several lines of insurance business as needed by that commercial venture. Lines of business which may be included in the CPP are property/glass, general liability, inland marine, crime, boiler and machinery insurance, and commercial automobile.
Commercial Auto
Coverage designed to provide a "standard" form for insuring commercial vehicles (other than private passenger cars).
Commercial Umbrella
A form of liability insurance protecting policyholders for claims in excess of the limits of their primary automobile, general liability and workers compensation policies, and for some (few) claims excluded by their primary policies which are subject to a deductible, which may range from $250 for a personal umbrella to a minimum of $10,000 for a commercial umbrella.
Death Benefit
The limit of insurance or the amount of benefit that will be paid in the event of the death of the covered person.
Debris Removal Clause
A property insurance provision which provides coverage for the cost of cleanup and debris removal after a covered cause of loss has occurred, such as cleanup after a fire or windstorm.
Declaration or Declaration Page
1) With respect to property and liability insurance, the portion of the insurance policy itself, used to detail the name and address of the insured, the locations covered, the policy period, limits of insurance, endorsements attached and premiums for coverage. Commercial policies also contain such items as the type of entity and type of operation of the insured. 2) A statement made to the company or to its agents by a policyholder, upon which the company may rely in undertaking the insurance.
Decreasing Term Life Insurance
A life insurance policy in which the death benefit starts out at the full stated amount but declines on a set scale throughout the life of the policy, reaching zero at the end of the policy term.
Defense Clause
A provision in commercial and personal liability insurance policies whereby the insurer has the right and duty to defend a lawsuit against the insured, even when those suits are considered false, groundless or fraudulent.
Deferred Annuity
A type of annuity where premiums are paid on an ongoing basis, but the benefit payments are deferred until a later date. The annuity can be scheduled to begin on a specific date or when a set age of the recipient is attained. A common example is an annuity that has been purchased for a child to pay for the child's college education. Payments are ongoing, and the payout may be scheduled to begin when the child turns 18.
Depreciation
The reduction in value of tangible property caused by physical deterioration or obsolescence.
Detached Structures
Structures located on the same premises, but not physically attached to each other.
Direct Damage
Causes of loss that produce direct and straightforward property damage (without interruption in time or deviation in space) from the cause of the event to the damaged property.
Disability Income Insurance
A form of coverage which provides benefits to employees disabled by sickness or accident not related to employment. An extension of workers compensation acts in New York, New Jersey, California, Hawaii, Puerto Rico and Rhode Island.
Disappearing Deductible
A disappearing deductible is a dollar amount deducted from the amount of loss which is reduced as the size of losses increase, finally disappearing entirely (for a "large" loss) to provide full coverage when a loss reaches a certain specified figure. Deductible amounts vary from $500 to $5,000, and the limit at which the deductible disappears is usually between $5,000 and $25,000. Disappearing deductible plans are principally associated with fire policies, which thus qualify for reduced rates.
Draft
A substitute for a check, used by many insurance companies to pay claims. A draft is payable through a named bank, which collects the amount of the draft from the issuing insurance company and then gives credit to the claimant payee's local bank.
Drive-Other-Car Coverage
A provision in an automobile policy designed to protect the policyholder (and insureds other than the policyholder) when driving cars other than the one described in the policy.
Damages
In liability insurance, refers to awards which may fall into either compensatory or punitive. Compensatory consists of either general damages, which include pain and suffering, and special damages, which are out-of–pocket expenses. Punitive (or exemplary) are amounts that are awarded as a form of punishment or to act as an example.
Diminished Value
Refers to either a real or perceived reduction in market value to a vehicle that has been damaged in an accident and then repaired.
Deadheading Coverage
Auto coverage for the liability exposure of operating a tractor/trailer rig (truck) with an empty trailer
Earned Premium
The portion of the policy premium allocated to the expired or used portion of the policy term. This also includes any short-rate charge made on policy cancellation.
EDP (Electronic Data Processing) Insurance
An "all-risk" policy that provides protection on equipment, software and extra expenses incurred as a result of failure of such equipment caused by an insured loss and loss of earnings. Also know as an EDP policy. Coverage may be extended to include liability claims alleging errors and omissions by data processing companies.
Effective Date
The day upon which a policy first becomes eligible to pay covered losses.
Employers Liability Insurance
Coverage against the common law liability of an employer for injuries sustained by employees, as distinguished from liability imposed by a workers compensation law.
Equifax
The insurance end of Equifax is now known as ChoicePoint, Inc. It is an organization widely used by insurance professionals to obtain information on applicants for underwriting purposes such as motor vehicle reports, prior loss or claims history (C.L.U.E.) reports, retail credit reports and even inspection reports. Equifax was formerly known as the Retail Credit Company.
Equipment Floater Insurance
A form of inland marine insurance, often on an "all-risk" basis, covering various kinds of equipment.
Errors and Omissions Insurance
1) A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others. (See nonrecording chattel mortgage policy.) 2) A form of coverage for financial institutions protecting against loss to lending institutions which fail to effect insurance coverage.
Excess Liability Insurance
Liability insurance designed to provide an extra layer of coverage above the primary layer. The excess insurance does not respond, however, until the limits of liability in the primary layer have been exhausted. Because of the method of response, it is often much less costly than the primary layer, per $1,000,000 of coverage. The excess layer provides not only higher limits, but catastrophic protection for very large losses.
Expense Constant
A flat premium charge made on small workers compensation policies based upon the fact that the expense factor on such risks is inadequate to cover the cost of issuing and handling the policy.
Experience Rating
A form of individual risk rating which takes into consideration the loss experience of the particular risk as a credit or a debit to the manual rate for the insured's classification. As the size and number of exposure units increase (e.g., a multiple location risk), more credibility is given to the insured's own experience. (See merit rating.)
Expiration
1) The cessation of insurance when the time period for which it was written has ended. 2) The date on which insurance expires. 3) The detailed policy records of customers served which are owned by independent insurance agents.
Extra Expense Insurance
Reimbursement for additional expenses incurred because of an insured loss. Written either as a separate policy or as an endorsement.
Equipment Breakdown Coverage
Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.
Excess and Surplus Insurance
An amount of protection which bears all or a portion of a loss after the loss exceeds an agreed amount. This amount may or may not be insured elsewhere by the company issuing the policy. Excess policies are not subject to the basic principle of contribution with non-excess policies, although they may contribute or share the loss with other excess policies.
Paid-Up Insurance or Paid-Up At Age Life Insurance
A whole life insurance policy giving standard lifetime protection, but where the policy becomes paid in full at a certain age, such as a policy paid in full at age 60.
Emergency Road Service
Refers to coverage agreements that respond to risks of the road such as dealing with dead batteries, flat tires, towing charges, locksmith services, etc.
Face Value
As used in life insurance, the amount stated on the first page of the policy that will be paid at maturity, upon death of the insured or expiration of the endowment period. Additional benefits may be provided by riders or dividends. Also known as face amount.
FAIR Plan
A program to provide "fair access to insurance requirements" for property owners who experience difficulty in buying insurance on property located in blighted or deteriorating urban areas. Basically the plan assures a property owner of physical inspection of property and a promise to provide fire and allied lines insurance if the property is adequately maintained and if recommended improvements necessary to make the property insurable have been made. Many of these plans have been extended to cover statewide in those states adopting them.
Farmowners-Ranchowners Policy (FO-RO)
A package policy for farming and ranching risks which can be described as a homeowners policy adapted for farm and ranch properties. Basically, the policy provides property and liability insurance to which may be added appropriate additional coverages such as animal collision, employers liability, custom farming, etc.
Fire Protection Class
A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Fire Protection Class 1 is the best class (a city or town having fewer than 501 points), and Fire Protection Class 10 is the worst (more than 4,500 points). Also known as town class or town grading.
First Named Insured
The party named first in the Declarations of an insurance policy. The first named insured has become significant in commercial insurance because the terms and conditions of the policy itself detail that many of the duties and obligations to the contract must be performed by, or are the responsibility of, the first named insured versus any or all named insureds. Additionally, the insurer has obligations, such as proper notice of cancellation or nonrenewal and return premium refund, that need go only to the first named insured.
Fixed Annuity
A life insurance annuity providing guaranteed or fixed benefit payments for the term of the annuity.
Floater
A policy which covers property at many locations, even worldwide and in the course of transit, i.e., the protection "floats around" with the objects insured.
Flood Insurance
Coverage against damage done by the rising or overflowing of bodies of water.
Frame Building
A type of construction in which the outer walls are made of lumber.
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