A - Z of General Insurance

ACTUAL CASH VALUE
The cost of repairing or replacing damaged property with other of like kind and quality in the same physical condition; commonly defined as replacement cost less depreciation.

Adjuster
A person who represents an insurance company who seeks to determine the extent of the firm's liability for a loss when a claim is submitted.

Agent
One who solicits, negotiates or effects a contract of insurance on behalf of an insurer.

Aggregate
The maximum dollar amount which may be collected for a single occurrence, during the policy period or during the insured's lifetime.

Allied Lines
A term for forms of insurance allied with property insurance, covering such perils as sprinkler leakage, water damage, and earthquake.

Application
A signed statement of facts requested by the company on the basis of which the company decides whether or not to issue a policy. This becomes a part of the contract; places reliance on statements by the applicant.

Arson
The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.

BINDER
A temporary insurance contract made by an agent of an insurance company.

Broker
One who represents an insured in the solicitation, negotiation or procurement of contracts of insurance.

Business Interruption
Provides coverage for a loss of INSURANCE earnings in the event that the policyholder's business is shut down by fire, windstorm, explosion, or other insured peril.

CAPACITY
The financial ability of an insurer to under-write new insurance. It is generally measured by the relation-ship of premiums written to surplus (net worth) and is modified by access to reliable reinsurance.

Catastrophic Loss
A loss (or related losses) that is unbearable in that it causes severe consequences such as bankruptcy to a family, organization, or insurer.

Class Rating
A premium rate determination in which all risks with similar characteristics are charged the same rate.

Co-Insurance Clause
A clause under which the insured shares in losses to the extent that he is underinsured at the time of loss or in a proportion agreed to in advance.

Consequential Loss
An indirect loss. For example in property insurance arising from the policyholder's inability to maintain or use the property over a period of time.

DIRECT LOSS
A loss that results directly from a peril such as fire.

ENDORSEMENT
A document which modifies the protection of a policy, either expanding or decreasing its benefits, or adding/excluding certain conditions from the policy.

Exclusions
Specific perils or losses listed in the policy which will not provide benefit payments.

Exposure
The state of being subject to the possibility of loss.

FORTUITOUS LOSS
Fortuitous Loss Losses that occur as a matter of chance. Losses are not controlled or influenced by the insured.

HAZARD
A condition that increases the probability or severity of loss.

Hold-Harmless Clause
A contractual provision which transfers risk from one party such as a property owner to another party such as a tenant.

INDEMNITY
A principle that says an insured should not collect more from insurance than the amount of loss.

Independent
Adjuster A person who represents an insurer in settling loss claims but is not an employee of the insurer or of the insured.

Independent Agent
An agent who represents several companies as an independent contractor rather than an employee.

Indirect Loss
A loss that arises out of a direct loss but not caused directly and immediately by that peril.

Insurable Interest
If the occurrence of a loss, such as destruction of a house by fire, will affect you adversely, you have an insurable interest.

Insured
In property and liability insurance, the person to whom, or on whose behalf, benefits are payable.

LAPSE
Termination of a policy caused by the policyholder's failure to pay the premium within the time required.

Livery
In automobile insurance, the carrying of passengers for hire.

Loss Control
Activities that reduce the severity of a loss that has occurred.

MALPRACTISE
Insurance Liability insurance policy for professionals, such as physicians and surgeons, to protect them against the risk of claims for damages in connection with professional services.

PERIL
The cause of a possible loss.

Policy Term
The period for which an insurance policy provides coverage.

Pro Rata Liability Clause
If a loss covered by this policy is also covered by other insurance, the insurer will pay only the proportion of the loss that the limit of liability that applies under this policy bears to the total amount of insurance covering the loss.

Proximate Cause
The cause actually responsible for the loss; the one that set in motion the events that led to a loss.

Punitive Damages
In Liability cases, damages awarded separately and in addition to compensatory damages as punishment for the wrongdoer.

REINSTATEMENT
The resumption of coverage under a policy which has been lapsed.

Reinsurance
Assumption by one insurance company of all or part of a risk undertaken by another insurance company.

Renewal
The continuation of coverage under a policy beyond its original term by the acceptance of a premium for a new policy.

Rider
A document which modifies the protection of policy, either expanding or decreasing its benefits or adding/excluding certain conditions from the policy.

SUBROGRATION
Gives the insurer whatever right against third parties you may have as a result of the loss for which the insurer paid you.

Surety Bond
An agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period.
U
UMBRELLA LIABILITY POLICY
A form of insurance protection against losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability policies, subject to a deductible.

Underwriting
The process by which the insurer decides on what basis it will issue a policy.

WARRANTY
A statement made by the applicant for insurance which, if false, provides the basis for voiding of the policy.