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Definition
| A sudden, unforeseen, unintended, and unplanned event. |
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Term
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Definition
| An event that results in a loss. It includes an accident, but is a broader definition because it includes continuous or repeated exposure to harmful conditions that results in property damage. |
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Term
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Definition
| The termination of an insurance policy before its expiration date. Either the insured or the insurer may cancel the policy. |
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Term
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Definition
| The cancellation of a policy for which a refund is made of the unearned premium calculated in proportion to the time the policy was in force. When the insurer cancels the policy, the unearned premium is refunded to the insured on a pro rata basis. |
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Term
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Definition
| The cancellation of a policy for which the premium refund is calculated according to a short rate table whereby the insurer retains a portion of the unearned premium. When the insured requests cancellation of the policy, the unearned premium is refunded to the insured on a short rate basis. |
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Term
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Definition
| The cancellation of a policy on the date the policy becomes effective. This type of cancellation requires th4e full return of the paid premium. |
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Term
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Definition
| The termination of an insurance policy after its expiration date by the insurer. |
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Term
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Definition
| A cause of a potential loss. |
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Term
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Definition
| The cause that sets other causes in motion when multiple causes combine to produce loss of damage. The cause without which a given result would have not occurred. Ex: A fire that has a subsequent explosion or smoke damage; without the fire there would not have been a subsequent explosion or smoke damage. |
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Definition
| A fire that produces a visible spark, flame, or glow and leaves the area in which it was intended to be kept. |
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Term
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Definition
| A condition or defect that exists within property itself that causes the property to spoil, break, become defective, or destroy itself. Insurance policies typically exclude inherent vice. Ex: The quality of materials used in a painting allows th4e painting to fade or lose luster with time. |
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Term
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Definition
| A document that temporarily provides insurance coverage until a policy is issued. The binder specifies the perils covered, the amount of coverage, the effective date of the coverage, and the name of the insurer providing the coverage. The binder does not state the premium amount. |
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Definition
| The process whereby a disputed claim is decided by a neutral third party. Arbitration is sometimes used to resolve differences between the insured and insurer. |
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Definition
| The right of the insurer to take possession of damaged property after the loss to the property has been paid. The salvage belongs to the insurer. |
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Term
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Definition
| A written amendment attached to the policy by the insurer to broaden or restrict coverage, or to further define certain policy provisions. Once attached, the endorsement takes precedence over the original provisions of the policy. An endorsement may also be referred to as a rider. |
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Term
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Definition
| A situation where there are 2 causes resulting in a loss and 1 of the causes is excluded while the other cause is not excluded. Unless the policy specifies otherwise, the loss is covered. Ex: A policy that excludes earth movement will still pay a loss due to fire or explosion that ensues directly from the earth movement. |
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Term
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Definition
| A situation under which at least 2 policies provide identical coverage for the same risk. When policies are concurrent, each policy pays that proportion of a loss that its limits bear the total of all policies. |
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Term
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Definition
| A situation under which at least 2 policies cover an insured's property against damage or destruction, but since the limits of coverage, kinds of property, and perils covered are not the same under all policies, the insured may not be fully covered in the event of a loss. |
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Term
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Definition
| An individual or organization who has taken into its care, custody, and/or control the property of another for servicing, repair, or storage. |
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Term
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Definition
| An individual who retains the ownership of property that has been taken into the care, custody, and/or control of a bailee. |
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Term
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Definition
| Property coverage that provides benefits up to the limits of a policy, regardless of other policies in effect. |
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Term
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Definition
| Property coverage above the primary amount of insurance. Excess insurance does not pay until any primary insurance has been exhausted. |
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Term
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Definition
| A property that contains personal property or contents but has no occupants is described as unoccupied. |
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Term
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Definition
| A property that has neither occupants nor personal property is described as vacant. |
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Term
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Definition
| Damage to property in which the proximate cause of the loss is an insured peril. |
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Term
Indirect Loss
(Consequential/Contingent Loss) |
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Definition
| A second or financial loss occurring as the result of a direct loss. |
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Term
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Definition
| Coverage applies only to losses caused by perils that are specifically stated in the policy. Ex: Fire, lightning, wind, hail, aircraft, riot, vehicles, explosion, smoke, etc. |
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Term
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Definition
| Coverage applies to all losses caused by all perils except for those specifically excluded. Open peril coverage is sometimes referred to as All Risk Coverage. Ex: Some of the perils typically excluded are earth movement, ordinance or law, power failure, nuclear hazard, etc. |
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Term
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Definition
| The policy pays for the cost to repair or replace the damaged property at the time of loss, less depreciation. |
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Term
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Definition
The policy pays for the cost to replace or repair the damaged property (not exceeding policy limits) at the time of the loss without an adjustment for depreciation.
NOTE#1 The Replacement Cost method of loss valuation requires that the coverage amount at the time of the loss be at least equal to 80% of the cost of replacement.
Note#2 The Replacement Cost method of valuation requires repair or replacement to the damaged property with like kind and quality material. |
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Term
| Functional Replacement Cost |
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Definition
| A property policy provision that changes the valuation method otherwise applicable (ACV or RC) to valuation that allows replacement with less costly property that is functionally equivalent. |
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Term
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Definition
| A property policy provision that changes the valuation method otherwise applicable (ACV or RC) to a valuation method that allows reimbursement to the insured for damaged property according to the price a willing buyer would pay for the property purchased from a willing seller. |
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Term
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Definition
| An option for property policies insuring various classes of property whose actual value or replacement cost is difficult to determine. The insured and the insurer agree, at the time of insuring, on an amount of insurance to be paid in the event of a loss. Ex: Fine arts and antiques are classes of property insured on an agreed value basis. |
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Term
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Definition
| An amendment to the valuation method of a property insurance policy insuring unusual or valuable piece of property that establishes, at the time of insuring, a maximum amount of insurance to be paid in the event of a loss. Ex: Antique and classic automobiles are types of property insured on a stated amount basis. |
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Term
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Definition
| Many states have passed legislation know as a Value Policy Law that requires an insurer to pay the full amount of insurance on an insured structure in the event of a total loss. Ex: A building that is insured for %500K sustains what is determined to be a total loss as the result of a fire. The insurer pays the full $500K regardless of the value of the building at the time of loss. |
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Term
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Definition
| This method of writing coverage is used when insuring 1 property on 1 policy for 1 specific amount of insurance. |
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Term
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Definition
| This method of writing coverage is used when insuring 1 property on 1 policy with a specific amount of insurance on each property. |
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Term
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Definition
| This method of writing coverage is used when insuring more than 1 property on 1 policy for a single amount of insurance that applies to all properties covered under the policy. The amount of insurance must equal at least 90% of the value of all the properties insured. Ex: Commonly used to insure business personal property or contents at multiple locations with no specific limit per location. |
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Term
| Insuring Agreement or Clause |
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Definition
| States that the insurer will indemnify the insured for a covered loss. It is the insurer's promise of protection to the insured. A description of the covered causes of loss (perils), that determines the coverage provided, is contained therein. |
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Term
| Additional/Supplementary Coverages |
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Definition
| Coverage for incidental expenses that frequently occur in connection with causes of loss (perils) stated in the policy. Ex: Debris removal, Fire Dept Services Charge, Property Removed, etc. |
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Term
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Definition
| The portion of the policy that sets forth the rights, rules, duties, and obligations of the insurer and the insured to follow throughout the policy period. |
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Term
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Definition
| Specifies that coverage applies only to a loss or losses that occur during the policy period stipulated on the Declarations Page of the policy. |
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Term
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Definition
| Specifies the geographic area in which the property must be damaged in order for coverage to apply. |
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Term
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Definition
| Specifies that if the insurer broadens coverage with no increase in premium, the broadened coverage automatically applies to existing policies without the need for an endorsement. Ex: Expanding the time from 72 to 168 hours as a single event under the Earthquake Cause of Loss Form to the Commercial Package Policy. |
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Term
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Definition
| Specifies that the insured may not transfer rights of ownership or interest in an insurance policy to another party without the insurer's written consent. |
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Term
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Definition
| The legal process by which an insurer seeks recovery of the amount paid to the insured from a third party responsible for having caused the loss. ___________ transfers an insured's legal right of recovery to the insurer that has paid a claim. |
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Term
| Insurable Interest and Limit of Liability |
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Definition
| Specifies that the insurer will not be responsible for an amount which is greater than the financial interest of an insured person or more than the limit of liability state on the Declarations Page of the policy. |
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Term
| Restoration/Nonreduction of Limits |
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Definition
| Specifies the sum and circumstances under which an insurer charges the insured, usually a business firm, to restore a policy to its initial face value or not reduce limits of coverage after the insure has pad a claim either to the insured business or a third party on behalf of the business. |
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Term
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Definition
| Specifies the valuation method(s) used to pay losses. |
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Term
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Definition
| Specifies that if the insured and the insurer cannot agree on the amount of a loss, either may demand an appraisal. If demanded, the insured and the insurer will each select an appraiser, who then jointly select an umpire. The appraisers will appraise the loss and either agree or submit their differences to the umpire. An agreement by any 2 of the 3 parties is binding, and each party will pay the cost of its own appraiser and share equally the cost of the umpire. |
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Term
| Other Insurance (aka Apportionment or Pro Rata Liability) |
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Definition
| Specifies the process to be followed when more than 1 policy covers the same loss. Each policy pays no more than ts share of the loss. |
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Term
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Definition
| Specifies the time frame within which the insurer must pay a loss to the insured after the insurer has received the insured's proof of loss and reached an agreement with the insured. Under ISO (Insurance Services Office) Personal Lines Forms this time frame is 60 days, and under Commercial Lines Forms this time frame is 30 days. |
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Term
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Definition
| specifies that the insured may not abandon or relinquish ownership of damaged property to the insurer for disposal or repair. |
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Term
| Standard Mortgage Clause (aka Mortgage Clause) |
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Definition
| Specifies and protects the mortgagee's (lender's) financial interests in property insured by the policy. The mortgagee must perform certain duties to protect its interests, which include: a) Paying any premium due under the policy on demand if the insured fails to do so. b) Notifying the insurer of any change in ownership, occupancy, or substantial change in risk of which the mortgagee is aware. c) Submitting a signed, sworn statement of loss within 60 days after receiving notice from the insurer of the insured's failure to do so. |
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Term
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Definition
| Specifies that the insurer will not recognize any assignment or grant any coverage that benefits a person or organization holding, storing, or moving the insured property for a fee. |
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Term
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Definition
| Specifies the procedure to be followed if the insurer has made payment under the policy. Each party shall notify the other of any recovery, and at the insured's option the property will be returned or retained by the insured or it will become the insurer's property. If the recovered property is returned to or retained by the insured, the loss payment will be adjusted based upon the amount the insured feceived for the recovered property. |
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Term
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Definition
| Specifies that bankruptcy or insolvency of the insured does not relieve the insurer of any of its duties or obligations under the policy. |
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Term
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Definition
| The portion of the policy that specifies the causes of loss (perils), or property not covered, or any circumstances under which coverage does not apply. a few of the typical property exclusions would be earth movement, flood, war, wear and tear, insect and vermin, inherent vice, and neglect of the insured to protect the property by any reasonable means at and after time of loss. Sometimes it is stated that the _______ deny coverage for perils, hazards, and locations that are uninsurable by their nature. |
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Term
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Definition
| Provision contained in most policies insuring commercial property, and is used to encourage the insured to purchase and maintain insurance to value, and to establish the basis of payment in the event the insured fails to maintain a specified percentage of that value. The higher the ______ percentage the insured agrees to purchase and maintain throughout the policy period, the lower the rate that the insured pays for insurance. _______ applies only in the event of a partial loss, as total losses typically are paid in accordance with the Valued Policy Law. |
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