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Glossary
of Insurance Terms & Common Artisan Contractor 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
Acts
of God:
Perils that cannot reasonably be guarded against, such as
floods and earthquakes.
Actual
cash value (ACV): The replacement cost of property less
allowance for depreciation.
Actuary:
An individual, often holding a professional designation, which
computes statistics relating in insurance. Actuaries are most
frequently used to estimate loss reserves and develop premiums.
Professional designations are awarded by the Casualty Actuarial
Society and the Society of Actuaries.
Additional
Insureds: Persons who have an insurable interest in the
property/person covered in a policy and who are covered against
the losses outlined in the policy. They may receive less coverage
than the primary named insured.
Aggregate:
The maximum amounts payable by an insurance carrier on behalf
a policyholder during any given annual policy period.
Aggregate
limits: A yearly limit, rather than a "per occurrence"
limit. Once an insurance company has paid up to the limit,
it will pay no more during that year.
Agreed
Amount:: An optional property coverage under which the
insured and the insurance company agree on the stated value
for the property. If the insured and the insurance company
agree on the stated value for the property. If the insured
purchases coverage in the amount of the agreed value, no coinsurance
applies.
Agreed
Amount Clause: Aprovision in fire insurance policies covering
certain classes of property, whereby the coinsurance clause
is suspended if the insured carries an amount of insurance
specified by the company (usually 90 percent or more of value).
All-risk
agreement: A property or liability insurance contract
in which all risks of loss are covered except those specifically
excluded.
Arbitration:
A method of settling disputes between two parties
of a contract in lieu of litigation. Usually each side selects
one party and agrees upon a third to hear the evidence and
render a decision.
Attractive
nuisance doctrine: A legal doctrine that increases the
degree of care owed to a child; greater than ordinary care
is required to a child who is a trespasser.
Audit:
Asurvey of the insured 's payroll and/or gross receipts records
to determine the premium that should be paid for the coverage
furnished. Used in Workers ' Compensation and General Liability
policies.
Basic
Form: a standardized cause of loss form naming 11 basic
perils that may be insured against. It provides the most basic
package of covered causes of loss.
Bid
Bond: a bond filed with a bid for a construction or other
project which guarantees that if the contractor has the low
bid and is awarded the job, he will furnish the required Performance
Bond.
Binder:
a legal agreement issued by either an agent or an insurer
to provide temporary insurance until a policy can be written.
It should contain a definite time limit, be in writing, and
clearly designate the company in which the risk is bound as
well as the amount, the perils insured against, and the type
of insurance.
Blanket
coverage: Property at several locations or all property
at a given location is insured under a single item.
Bodily
Injury: The injury to or death of another person.
Bodily
Injury Liability: A legal liability that may arise as
a result of the injury to or death of another person.
Bodily
Injury Liability
Coverage: protection against loss arising out of the liability
imposed upon the insured by law for damages due to bodily
injury, sickness, or disease sustained by any person or persons
(other than employees). This is one of the types of coverage's
(property damage liability being the other) provided by general
and auto liability insurance.
Boiler
and machinery insurance: Coverage for explosions caused
by steam boilers, compressors, engines, electrical equipment,
flywheels, air tanks, and furnaces. Prevention of loss is
emphasized even more than indemnification of loss.
Bond:
A three-party contract guaranteeing that if one person,
the principal, fails to perform as specified or proves to
be dishonest, the person to whom the duty is owed, the obligee,
will be financially protected by the insurer of the bond,
the surety.
Burglary:
The unlawful taking of property from within premises, entry
to which has been obtained by force, leaving visible marks
of entry.
Cancellation:
Termination of a contract of insurance in force by voluntary
act of the insurer or insured in accordance with the provisions
in the contract or by mutual agreement.
Care,
Custstody, and Control (CCC): A standard property damage
liability exclusion found in most liability insurance policies.
This exclusion precludes coverage for property which is in
care, custody, or control of the insured. This exclusion may
be worded so that it applies either to personal property only
or to all property. Some companies will occasionally consider
removing or modifying the exclusion on a specific or blanket
basis.
Cash
value: The savings element that accumulates with some
life insurance policies.
Certificate
of Inspection: A legal certificate that states that specified
installation, alteration or repair work has inspected and
is approved by the appropriate governmental body.
Certificate
of Insurance: A document which evidence that an insurance
policy has been issued and shows the amount and type of insurance
provided. Certificates of Insurance are often required by
lenders to show that financed property is insured. Contractors
and subcontractors providing services to the business manager
should also be required to provide insurance certificates.
it is important to note that an insurance certificate is not
a contract and does not place any obligations on the insurance
company. Certificates are only a statement that insurance
policies are in effect on the date they are issued.
Certificate
of Occupancy (C.O.): A document that certifies that a
structure meets all appropriate ordinances and codes and is
ready for its designated use.
Claims-made
policy: A policy wherein the insurer pays for claims made
during the year. The event giving rise to the claim may or
may not occur in a prior year.
Coinsurance:
A clause that requires the insured to insure to value or share
the loss with to insurance company.
Collision:
Upset of the covered auto and non-owned auto and/or its impact
with another vehicle or object. Coverage applies no matter
who causes the accident.
Commercial
general liability: A business liability policy designed
for a wide variety of business uses, covering premises operations,
product liability, completed operations, and operations of
independent contractors.
Completed
operations liability: The liability of a contractor for
completed work that the owner has accepted or for work abandoned
by the contractor.
Comprehensive:
Coverage on an auto policy that pays for damage to or
loss of your car, less any applicable deductible resulting
from perils such as fire, theft, vandalism & glass loss.
Concealment:
The failure of an applicant to reveal, before the insurance
contract is made, a fact that is material to the risk.
Conditions:
Circumstances under which an insurance contract is in force.
Breach of the conditions is grounds for refusal to pay the
loss.
Consequential
losses: Losses other than property damage that occur as
a result of physical loss to a business-for example, the cost
of maintaining key employees to help reorganize after a fire.
Consideration:
In an insurance contract, the specified premium and agreement
to the provisions and stipulations that follow.
Contributory
negligence: Partial guilt or negligence in a civil lawsuit
where both parties are to blame.
Declarations:
The section of an insurance policy, usually the first page,
that provides information such as the policy number, the insured's
name and address, the agent's name, etc.
Declination:
Rejection of an application for insurance by the insurer.
Deductible:
A definite dollar amount to be borne by the insured before
the insurer becomes liable for payment under the policy
Depreciation:
a decrease in the value of any type of tangible property
over a period of time resulting from use, wear and tear, or
obsolescence.
Dwelling:
The structure on the residence premises shown in the declarations,
used principally as a private residence, including attached
structures.
Dwelling
policy: Covers dwellings
that are not owner occupied, have up to five rooms for boarders,
and are ineligible for a homeowners' policy.
Effective
Date: the date on which the protection of an insurance
policy or bond goes into effect.
Employers
Liability Coverage: A coverage which becomes effective
when, for one reason or another, an injured employee 's claim
is not covered under workers ' compensation law.
Exclusive
Remedy: A doctrine that states that workers ' compensation
is the sole remedy doctrine stood for more than 60 years,
but has since been eroded by the "dual capacity"
doctrine and "third-party-over" suits.
Endorsement:
An addition made to an insurance policy. It usually adds
coverage and an additional premium may be charged.
Exclusions:
Restrictions of the coverage provided by an insurance
policy.
Fair
claim settlement laws: Laws establishing minimum standards
for insurers in handling loss claims.
Floater
policy: An inland marine insurance policy that covers
property subject to movement from on location to another.
Flood:
(1) An overflow of inland or tidal waves, (2) unusual
and rapid accumulation of runoff of surface waters, (3) mudslides,
(4) excessive erosion along the shore of a lake or any other
body of water, or (5) erosion or undermining exceeding its
anticipated cyclical levels.
Frequency:
How often a loss occurs or is likely to occur.
General
Liability Insurance: a form of insurance designed to protect
owners and operators of business from a wide variety of liability
exposures. These exposures could include liability arising
out of accidents resulting from the premises or the operations
of an insured, products sold by the insured, operations completed
by the insured, and contractual liability.
Guaranteed
replacement cost: Insurer agrees to pay for replacing
property without policy limit. Used in homeowners' program.
Hired
Automobile: autos the insured leases, hires, rents, or
borrows, but not autos owned by employees or members of their
households.
Incurred
Loss Ratio: the percentage of losses incurred to premiums
earned.
Independent
Contractor: one who agrees to perform according to a contract
and who is not an employee.
Insurance
Policy: the printed form which serves as the contract
between an insurer and an insured.
Insured:
the party to an insurance arrangement whom the insurer
agrees to indemnify for losses, provide benefits for, or render
services to.
Insuring
agreement: The part of an insurance contract that states
what the insurer agrees to do and the conditions under which
it so agrees.
Invitees:
Individuals, such as retail store customers, who are invited
onto the insured's premises for their own benefit and that
of the insured.
Lapse:
Termination of a policy because of failure to pay the
premium. In Life Insurance, the term refers to nonpayment
before the policy has developed any nonforfeiture values.
If it has, and the premium is not paid, it is said to have
lapsed "except as to nonforfeiture benefits that may
apply."
Liability
Limits: The maximum amount for which a Liability Insurance
Company provides protection in a particular policy.
Lien
Waiver: A form of receipt that is completed and signed
by a subcontractor or distributor when he is paid for his
labor or materials.
Line
of Credit: The limit a bank will lend a contractor at
any given time. It is also referred to as a contractor 's
borrowing capacity.
Liquidated
Damages: a sum stated in a contract, as the measure of
damages suffered by an owner due to the failure of a contractor
to complete the work within a stipulated time. This usually
figured as a fixed amount per day.
McCarran-Ferguson
Act: A federal law giving states the right to regulate
insurance, subject to certain limitations. This act allows
insurance companies to work together to collect loss and expense
data and gives insurers limited antitrust protection.
Mechanics
Lien: a type of lien issued in favor of persons supplying
labor or materials for a job. With it, clear title to the
property cannot be obtained until the claim is settled.
Minimum
Premium: the lowest premium that may be charged for an
insurance policy.
Moral
hazard: A hazard resulting from the indifferent or dishonest
attitude of an individual in relation to insured property.
Morale
hazard: A hazard resulting from the mental attitude of
a careless or accident-prone person.
Mortgagee
Clause: A clause in insurance contracts that gives first
right of recovery to the mortgagor of property that is covered.
Named
Insured: An individual in whose name the insurance contract
is issued and who is specifically identified as the person
being covered.
Negligence:
The failure to exercise the degree of care required by
law.
Non-Admitted
Insurer: An insurer not licensed to do business in the
jurisdiction in question.
Non-Owned
Auto Liability Coverage: protects an employer against
legal liability resulting when employees use their own autos
for the employer 's business purposes.
Occurrence
Policy: A clause in liability insurance policies under
which covered acts must satisfy certain conditions; the results
must be accidental and unintended, but the occurrence itself
can be a deliberate act of an insured.
Open
Rating: a system whereby a state allows an insurer to
use rates without prior approval.
Peril:
A specific contingency that may cause a loss.
Performance
Bond: this bond is used to indemnify the project owner
(or general contractor) for any loss that arises out of a
contractor 's ( or subcontractor 's) failure to perform the
work in accordance with the contract 's term and specifications.
If this happens, the surety must either arrange for completion
of the contract or pay the project owner or general contractor
the cost of completing the work up the amount of the bond
limit.
Peril:
the cause of loss (e.g., fire, windstorm, explosion, hail,
riot, vandalism, strife, malicious mischief, earthquake, flood,
sinkhole collapse, volcanic eruptions, etc.)
Permanent
Disability: A worker is entitled to compensation based
on the rated degree of disability. Benefits are based on the
earning capacity of the disabled worker. For disability
ratings between 70% and 100%, a life pension is granted.
Personal
Injury: Injury other than bodily injury arising out of
false arrest or detention, malicious prosecution, wrongful
entry or eviction, libel or slander, or violation or a person
's right to privacy committed other than in the course of
advertising, publishing, broadcasting or telecasting.
Personal
Property: Anything that is subject to ownership other
than real property.
Personal
Umbrella: A liability insurance policy that broadens coverage
for comprehensive personal liability and personal auto liability.
Provides limits of liability of $1 million or more.
Physical
Hazard: A condition stemming from the material characteristics
of an object, e.g., icy street (increasing chance of car collision)
and earth faults (hazard for earthquakes).
Policy
Period (or Term): The period during which the policy contract
affords protection, e.g., six months or one or three years.
Policyholder:
The insured in an insurance policy.
Policy
Year: The period between policy and anniversary dates.
Premium:
The total cost of insurance, found by multiplying the
rate by the number of units covered.
Proof
of Loss: A formal statement made by a policy owner to
an insurer regarding a loss. It is intended to give information
to the insurer to enable it to determine the extent of tangible
property.
Property
Damage: Refers to physical damage to tangible property
and to loss of use of tangible property.
Property
Damage Liability Insurance: protection against liability
for damage to the property of another, including loss of the
use of the property, as distinguished from liability for bodily
injury to another. In the majority of causes it is written
along with Bodily Injury Liability protection.
Property
Insurance: insurance that indemnified a person with an
interest in physical property for its loss or the loss of
its income producing abilities.
Rebating:
A practice, usually prohibited under state law, in which
a sales agent in insurance returns part of the commission
to the purchaser.
Reinstatement:
(1) restoration of a lapsed policy, (2) restoration of
the original amount of a type of policy that reduces the principal
amount by the amount of claims.
Reinsurance:
Insurance in which one insurer, the reinsurer, accepts
all or part of the exposures insured in a policy issued by
another insurer, the ceding insurer. In essence, it is insurance
for insurance companies. It allows insurers to spread the
risks of one policy among themselves and thereby write limits
higher than one company would feel comfortable doing alone.
Facultative reinsurance involves a one-time reinsurance transfer
arranged specifically on a single policy. Treaty reinsurance
involves an agreement in which a certain amount of the exposures
of all policies written by the ceding company are automatically
reinsured; in return, the reinsurer receives a percentage
of all premiums on the reinsured book of business.
Renewal:
The automatic re-establishment of in-force status effected
by the payment of another premium.
Renewal
Certificate: A short form certificate which is used to
renew a policy. It refers to the original policy, keeping
all of its provisions, but does not restate all of its insuring
agreements, exclusions, and conditions.
Rental
value: Consequential coverage that insures the loss of
rents in the event of the destruction of the insured property.
Replacement
cost: Property insurance that pays for the current replacement
cost of property without deduction for depreciation.
Risk:
Uncertainty as to economic loss.
Risk
transfer: A risk management technique whereby one party
(transferor) pays another (transferee) to assume a risk that
the transferor desires to escape.
Scheduled
coverage: Insurance in which property at two or more locations
is listed and specifically insured.
Severity:
The extent of a loss; how serious it is.
Subrogation:
The assignment to an insurer by terms of the policy or
by law, after payment of a loss, of the rights of the insured
to recover the amount of the loss from one legally liable
for it. After the insurer pays the insured 's claim, it subrogates
against the party that caused the loss to recover the amount
paid. Business managers should make certain that subrogation
recoveries from third parties are subtracted from loss data
used in experience rating or retrospective rating calculations.
Subrogation
Waiver: A waiver by the named insured giving up any right
of recovery against another party. Normally an insurance policy
requires that subrogation (recovery) rights be preserved.
In commercial insurance, a written waiver of subrogation rights
is permitted if it is executed before the loss occurs.
Surety
Bond: a bond guaranteeing that a principal will carry
out the obligation for which he is bonded. A surety bond is
most often issued to a contractor, a person seeking a license
or permit, or someone involved in a court case.
Underinsured
motorists endorsement: Coverage that will pay damages
when the other party's limits are lower than the insured's
and the other party is at fault.
Umbrella
Policy: The broadest form of excess insurance combined
with the equivalent of "all risks" liability coverage.
The umbrella agrees to provide: (1) additional limits of protection
over the underlying schedule, i.e., excess liability insurance,
(2) primary coverage if the underlying limits are exhausted,
and, (3) primary coverage for some otherwise uninsured risks,
subject to a retention.
Underwriter:
The employee of an insurance company or managing general
agency who has the responsibility for determining whether
or not the insurer will write insurance that has been applied
for, the amount of coverage the insurer will write, and the
premium that will be charged.
Underwriting:
All activities carried out to select risks acceptable
to insurers in order that general company objectives are met.
Uninsured
motorist insurance: Pays for your bodily injures that
result from an accident with another vehicle if the other
driver is negligent and does not have any insurance (or has
insurance less than that required by law).
Utmost
good faith: A legal doctrine in which a higher standard
of honesty is imposed on parties to an insurance agreement
than is imposed through ordinary commercial contracts.
Workers'
Compensation: compensation - required by law in all states
- to workers injured while on the job, whether or not the
employer has been negligent. Benefits vary according to state
laws but generally require the payment of medical expenses
and partial wage continuation. The workers ' compensation
laws apply to all individuals except those specifically excluded.
Employers are required by law to purchase insurance for their
exposure unless they file for and obtain permission to become
qualified self-insurers.
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