Abandonment

the abdiction of insured property into the hands of another, or into the possession of no one in particular.

Absolute Liability

a type of liability that occurs due to extremely dangerous operations, such as the use of explosives or working at extreme heights.

Accident

an uplanned, unforeseen event which occurs suddenly and at a specific place.

Actual Cash Value

(ACV)

the required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation.

Additional Coverage

a provision in an insurance policy that allows for more coverage for specific loss expense without increase in premium.

Additional Insureds

individuals or business that are not named as insured on the declaration page, but are protected by the policy, usually in regard to a specific interest.

Adhesion

Admitted Insurer

an insurance company authorized and licensed to transact business in a particular state.

Adverse Selection

the tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.

Agent

an individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer.

Aggregate Limit

Agreed Value

Aleatory

Alien Insurer

an insurance company that is incorporated outside the United States

Apparent Authority

the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Appraisal

an assessment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid.

Arbitration

method of claim settlement used when the insured and insurer cannot agree upon the amount of the loss.

Assignment

Authorized Insurer

an insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

Auto

a land motor vehicle, trailer or semi-trailer designed for use on public roads, including attached machinery or equipment; auto does not include mobile equipment.

Avoidance

Bailee

Beneficiary

the person who receives the proceeds from the insurance policy.

Binder

a temporary contract that puts an insurance policy into force before the premium has been paid. 

Blanket Bond

a type of bond that covers losses caused by dishonest employees.

Blanket Insurance

Bodily Injury Liability

legal liability arising from death or physical trauma to a person as a result of a negligent or purposeful act and omissions by an insured.

Boycott

an unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.

Builder's Risk Coverage Form

a commercial property form that covers buildings under construction.

Building and Personal Property Coverage Form

a commercial property form that covers buildings, and/or their contents.

Burglary

the forced entry into another's premises with felonious intent.

Cancellation

the termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy.

Casualty Insurance

a type of insurance that covers losses caused by injury to persons or damage to the property of others. 

Cease and Desist Order

a demand of a person to stop committing an action that is in violation of a provision.

Certificate of Authority

Certificate of Insurance

a legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided.

Class Rating

the practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.

Coercion

an unfair trade practice in which an insurer uses physical or mental force to persuade an applicant to buy insurance.

Coinsurance

an agreement between an insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses.

Combined Single

a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.

Commercial Lines

type of insurance that pertains to business, mercantile or manufacturing establishments.

Commissioner 

(Superintendent, Director)

the chief executive and administrative officer of a state insurance department.

Common Law

an unwritten body of law based on past judicial decisions as well as usages and customs. 

Complaint

a written statement of a liability claim given by the claimant; a reason for a lawsuit.

Components

factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits. 

Comprehensive Coverage

also known as Other Than Collision coverage, it covers losses by fire, theft, vandalism, falling objects, etc.

Concealment

the withholding of known facts which, if material, can void a contract.

Conditional Contract

a type of an agreements in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

Conditions

the section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.

Consideration

Consultant

a person who, for a fee, offers advice, counsel, opinion, or service regarding the benefits, advantages, or disadvantages promised under a policy of insurance.

Consumer Reports

Contract

an agreement between two or more parties enforceable by law.

Controlled Business

an entity that obtains and possesses a license solely for the purpose of writing business on the owner, immediate family, relatives, employer and employees.

Concurrent Causation

multiple events leadings to one loss.

Death Benefit

the amount payable upon the death of the person whose life is insured.

Declarations

Deductible

the portion of the loss that is to be paid by the insured before any claim benefits may be paid by the insurer.

Defamation

Deposit Premium Audit

Depreciation

the lessening of value of real and personal property due to age and wear and tear.

Direct Losses

physical damage to buildings and/or personal property as a result of direct consequence of a particular peril.

Director

(Superintendent, Commissioner)

the head of the state department of insurance.

Disability

a physical or mental impairment, either congenital or resulting from an injury or sickness.

Disclosure

an act of identifying the name of the producer, representative or firm, limited insurance representative, or temporary insurance producer on any policy solicitation.

Domestic Insurer

an insurance company that is incorporated in the state.

Domicile of Insurer

insurer's location of incorporation and the legal ability to write business in a state.

Economic Loss

the estimated total cost (both insured and uninsured) of an accident.

Endorsement

a printed addendum to a contract that is used to change the policy's original terms, conditions, or coverages.

Estoppel

a legal impediment to denying a fact or restoring a right that has been previously waived.

Excess Policy

a policy that only pays for loss after the primary policy has paid its limit.

Exclusions

causes of loss, exposures, conditions, etc.  listed in the policy for which the benefits will not be paid.

Exclusive or Captive Agent

an agent who represents only one company and is compensated by commissions.

Experience Rating

method of determining the premium based on the insured's own past loss experience.

Exposure

a unit of measure used to determine rates charged for insurance coverage.

Express Authority

the authority granted to an agent by means of the agent's written contract.

Extensions of Coverage

a provision in some property policies which allowed the extension of a major coverage to certain types of loss to property not specifically insured.

FAIR Plan

Fair Access to Insurance Requirements plan is a state-run program that makes insurance obtainable to those in high risk areas who have been unable to acquire insurance through other channels.

Fiduciary

an agent/broker who handles insurer's funds in a trust capacity.

First Named Insured

the individual whose name appears first on the policy's declaration.

Flood

Foreign Insurer

an insurance company that is incorporated in another state.

Fraternal Benefit Society

a life or health insurance company formed to provide insurance for members of an affiliated lodge, religious, or fraternal organization with a representative form of government.

Fraud

intentional misrepresentation or deceit with the intent to induce a person to part with something of value.

Functional Replacement Cost

the cost to replace damaged property with less expensive and more modern construction or equipment.

Gross Negligence

reckless behavior that shows disregard for the safety or lives of others.

Hazard

a circumstance that increases the likelihood of a loss.

Hazard, Moral

the effect of a person's reputation, character, living habits, etc. om his/her insurability.

Hazard, Morale

the effect of a person's indifference concerning loss has on the risk to be insured.

Hazard, Physical

a type of hazard that arises from the physical characteristics of an individual, such as a physical disability due to either current circumstance or a condition present at birth.

Implied Authority

authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

Indemnity

compensation to the insured that restores them to the same financial position that they enjoyed prior to the loss.

Independent Agents

agents that sell the insurance products of several companies and work for themselves or other agents.

Indirect Losses

losses resulting from a peril, but not directly caused by it. Indirect losses may include business disruption, rent insurance, extra expenses, and other consequences that occur over time.

Inflation Guard

a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually.

Insurable Interest

any interest an insured may have in property that is the subject of insurance, so that damage or destruction of that property would cause the insured financial loss.

Insurance

the transfer of the possibility of a loss (risk) to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Insurance Policy

a contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events.

Insured

the person or organization that is protected by insurance; the party to be indemnified.

Insured Contract

Insurer

an entity that indemnifies against losses, provides benefits, or renders services ( also known as the "company" or "insurance company").

Insuring Agreement

the section of an insurace policy containing the insurer's promise to pay, the description of coverage provided and perils insured against.

Intentional Tort

any deliberate act that causes harm to another person.

Interline Endorsement

a written admendment designed to eliminate redundancy and minimize the number of endorsements in the policy.

Judgement Rating

an approach used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.

Law of Large Numbers

a principal stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.

Legal Liability

a liability under the law that occurs when a person is responsible for injuries or damages to another due to negligence.

Liability

responsibility under the law.

Liberalization

a property insurance clause that extends broader legislated or regulated coverage to current policies, as long as it does not result in a higher premium.

Lien

a charge, security or encumbrance on property.

Limit of Liability

the maximum amount for which an insurer is liable.

Lloyd's Associations

organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.

Loss

the reduction, decrease, or disappearance of value of the person or property insured in a policy, by peril insured against.

Loss Payable Clause

a provision in property insurance that is used to cover the interest of a secured lender in personal property.

Loss Ratio

a calculation used by insurance companies to relate income from loss expenses:
loss ratio = (incurred losses + loss adjusting expense)/ earned premium.

Loss Valuation

a factor in determining the premium charged and the amount of insurance required.

Market Value

a seldom used method of valuing a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss.

Misrepresentation

a false statement or lie that can render the contract void.

Monoline Policy

a policy written separately as a single coverage.

Mutual Assessment Insurer

a mutual insurance company with the right to assess policyholder's additional amounts of premium to meet operational needs.

Mutual Companies

insurance organizations that have no capital stock, but are owned by the policyholders.

Mysterious Disappearance

A disappearance of property that cannot be explained as to the location, time or the manner or property loss.

Named Insured

the individual(s) whose name appears on the policy declaration.

Named Peril

the cause of loss specifically covered by the insurance policy. No coverage is provided for unlisted perils.

Negligence

the failure to use the care that a reasonable, prudent person would under the same or similar circumstances.

No Benefit to the Bailee

Nonadmitted Insurer

an insurance company that has not applied, or has applied and been denied a Certificate of Authority and may not transact insurance.

Nonconcurrency

a situation in which other insurance is written on the same risk, but not on the same coverage basis.

Nonrenewal

a termination of a policy by an insurer on the anniversary or renewal date.

Notice of Claim

a provision that spells out an insured's duty to provide the insurer with reasonable notice in the event of a loss.

Occurrence

a broader definition of loss, which differs from accident in that it inclides losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.

Open Peril

term usd in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against "any risk of loss" that is not specifically excluded.

Pair and Set Clause

a clause included in many property and inland marine policies, which provides that the insurer is not obligated to pay for the total value of a set of items if only one item has been lost, damaged or destroyed.

Partnership

a legal entity in which 2 or more persons agree to share the profits and losses of the business.

Passive

Peril

the cause of a possible loss.

Personal Injury Liability

legal responsibility for an injury to the character of another person cause by libel, slander, false arrest, invasion of privacy and other acts.

Personal Lines Insurance

type of coverage available to individuals and families for non-business risks.

Policy Limits

the maximum amount an insured may collect, or for which an insured is protected under the terms of the policy.

Policy Period

a period of time a policy is in effect ( also known as Policy Term).

Policyholder

the person in possession of an insurance policy; may or may not be the policyowner and/or insured.

 Premium

a periodic payment to the insurance company to keep the policy in force.

Primary Policy

a basic, fundamental insurance policy which pays first with respect to other outstanding policies.

Pro Rata

proportional distribution of shares of the loss for each insurance policy written on a piece of property.

Producer

a person who acts on behalf of the insurer to sell, negotiate, or effect insurance contracts; also known as an agent.

Proof of Loss

a sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid.

Property Damage Liability

legal liability arising from physical damage to tangible property of others caused by the negligence of an insured.

Proximate Cause

an act or event that is the immediate or actual cause of a loss.

Pure Risk

situations that can only result in a loss or no change; a gain is never possible. Pure Risk is the only type of insurance companies are willing to accept.

Rebating

any inducement offered in the sale of insurance products that is not specified in the policy.

Reciprocal

insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers.

Reduction

lessening the possibiity or severity of a loss.

Reinsurance

Replacement Cost

the cost to replace damaged property with like kind and quality at current price, without any deduction for depreciation.

Representations

statements made by the applicant on the insurance application that are believed to be true, but are not gauranteed to be true.

Retention

Retrospective Rating

a self-rating plan under which the actual losses during the policy period determine the final premium (subject to a minimum and maximum premium).

Right of Salvage

Risk

uncertainty as to the outcome of an event when two or more possibilities exist.

Risk, Pure

the uncertainty or chance of a loss occurring in a situation that can only result in a loss or no change.

Risk, Speculative

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain.

Robbery

the taking of property from another by using violence or the threat of violence.

Salvage

Settlement

the process by which an agreement is reached and a claim is resolved in liability insurance.

Severability of Interests

a provision that insurance applies separately to each insured in a policy, treating each individual as the only insured.

Sharing

Specific Insurance

a property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.

Speculative Risk

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain.

Split

Stated Amount

 an amount of insurance scheduled in a proprty policy which is not subject to any coinsurance requirements in the event of a covered loss.

Statute Law

the written law as enacted by a legislative body (i.e. the laws of the state), which generally takes precedence in cases where both common law and statute law apply.

Stock Companies

companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company.

Strict Liability

a liability that refers to damages caused by defective products even though the manufacturer's fault or negligence cannot be proven.

Subrogation

Superintendent

(Commissioner, Director)

the head of the state department of insurance.

Surety Bond

a guarantee that debts and obligations will be carried out, and the benefits will be paid for losses caused by nonperformance.

Surplus Lines

insurance for which there is no readily available, admitted market.

Theft

Third-Party Provisions

Tort

Transfer

Twisting

Umbrella Liability Policy

Unauthorized Insurer

Underwriter

Underwriting

the process of reviewing, accepting or rejecting applications for insurance.

Unilateral Contract

Underinsured Motorist Coverage

Uninsured Motorist Coverage

Unintentional Tort

Unoccupied

Utmost Good Faith

Vacant

a property that has no contents, furnishings, or occupants.

Valued Policy

Vicarious Liability

Waiting Period

Waiver

the voluntary abandonment of a known or legal right or advantage.

Warranty

a material stipulation in the policy that if breached may void coverage.

Workers Compensation