Insurance Term Glossary
- Jonathan Zschau
A
Additional Insured: A person or entity added to an insurance policy, granting them certain rights and coverage under the policy, typically for liability protection.
Aggregate Limit: The maximum amount an insurer will pay for all covered losses during a policy period.
Actual Cash Value (ACV): The replacement cost of an item minus depreciation for wear and tear or obsolescence.
Admitted Insurer: An insurance company licensed and authorized to do business in a specific state, adhering to state regulations.
All-Risk Policy: An insurance policy that covers all risks of loss except those specifically excluded.
Appraisal Clause: A provision in property insurance policies that allows disputes over the value of a loss to be resolved by an independent appraisal process.
Assignment of Benefits (AOB): A legal arrangement allowing a policyholder to transfer their claim rights or benefits to a third party, such as a contractor.
B
Bodily Injury Liability: Coverage for legal liability arising from physical injury, sickness, or death of a third party.
Builders Risk Insurance: A type of property insurance that provides coverage for buildings under construction, including materials and supplies.
Business Income Insurance: Also known as Business Interruption Insurance, this coverage reimburses a business for lost income and extra expenses during a suspension of operations due to a covered peril.
Businessowners Policy (BOP): A packaged policy combining general liability, property insurance, and business interruption coverage, typically for small to mid-sized businesses.
C
Cancellation Clause: A provision outlining the conditions under which an insurance policy can be terminated before its expiration date.
Captive Insurance: A type of self-insurance where a company creates its own insurance company to underwrite its risks.
Certificate of Insurance (COI): A document provided as proof of insurance coverage, outlining key policy details.
Claims-Made Policy: A liability policy that provides coverage for claims made during the policy period, regardless of when the incident occurred.
Coinsurance Clause: A provision requiring the insured to carry a certain percentage of the property’s value in insurance to receive full reimbursement for a loss.
Commercial General Liability (CGL): A policy that provides coverage for bodily injury, property damage, and advertising liability arising from business operations.
Commercial Property Insurance: Insurance that covers physical assets like buildings, equipment, and inventory owned by a business.
Comprehensive Coverage: Auto insurance that covers damage to a vehicle caused by events other than a collision, such as theft, vandalism, or natural disasters.
D
Declarations Page: The first page of an insurance policy that outlines key information, including the named insured, policy limits, premium, and covered risks.
Deductible: The amount the insured must pay out of pocket before the insurer pays a claim.
Depreciation: The reduction in the value of an asset over time, used in determining actual cash value.
Direct Loss: Physical damage directly resulting from a covered peril, such as fire or windstorm.
Directors and Officers (D&O) Insurance: Liability coverage for directors and officers of a company for claims arising from their decisions and actions in their official capacities.
E
Endorsement: A written amendment to an insurance policy that changes its terms, coverage, or limits.
Excess Liability Insurance: Coverage that provides limits above the underlying liability policy limits.
Exclusions: Specific conditions or circumstances listed in a policy that are not covered by the insurance.
Experience Modification Factor (Mod Factor): A number used to adjust workers' compensation premiums based on an employer's claims history compared to others in the same industry.
F
Fiduciary Liability Insurance: Coverage for claims alleging a breach of fiduciary duties, typically related to the management of employee benefit plans.
First-Party Coverage: Insurance that protects the insured’s own property or interests, as opposed to liability coverage.
Flood Insurance: Coverage for losses due to flooding, typically excluded under standard property policies.
G
General Aggregate Limit: The maximum amount an insurer will pay for all claims under a liability policy during the policy period.
Garage Liability Insurance: Coverage for liability arising out of garage operations, such as auto repair shops and dealerships.
H
Hired and Non-Owned Auto Insurance (HNOA): Coverage for liability arising from the use of vehicles that are not owned by the insured but used for business purposes.
Homeowners Insurance: A personal lines policy that covers a home and its contents against perils such as fire, theft, and liability exposures.
I
Indemnity: Compensation paid by an insurer to the insured for a covered loss to restore them to their financial position prior to the loss.
Insurable Interest: A financial stake in the subject of the insurance, necessary to purchase coverage.
Insurance-to-Value (ITV): Ensuring the insured property is covered to its full replacement value or a specified percentage.
L
Liability Insurance: Coverage for legal responsibility to third parties for injury, property damage, or other losses.
Loss of Use Coverage: Reimbursement for additional living expenses or lost rental income when property is uninhabitable due to a covered peril.
M
Medical Payments Coverage (MedPay): Pays medical expenses for injuries to others regardless of fault, included in personal and auto liability policies.
Moral Hazard: The risk that the insured may act recklessly or dishonestly due to the protection of insurance.
N
Named Insured: The person or entity explicitly listed on the insurance policy as the primary policyholder.
Negligence: Failure to exercise reasonable care, resulting in injury or damage to another party.
P
Personal Umbrella Policy: A policy providing additional liability coverage above and beyond primary policies, such as auto or homeowners insurance.
Premium: The amount paid by the insured to the insurer for coverage.
Professional Liability Insurance: Also known as Errors and Omissions (E&O) insurance, it provides coverage for claims arising from professional services or advice.
R
Reinsurance: Insurance purchased by an insurance company to transfer part of its risk to another insurer.
Replacement Cost Value (RCV): The cost to replace damaged or destroyed property with new property of like kind and quality without depreciation.
Retroactive Date: The date on or after which incidents must occur to be covered under a claims-made policy.
S
Scheduled Property: Items specifically listed and insured under a policy, often with higher limits than standard coverage.
Self-Insured Retention (SIR): The portion of a loss that must be paid by the insured before the excess insurer pays.
T
Third-Party Coverage: Insurance that protects the insured against claims made by third parties for injury or damage.
Tort: A wrongful act or infringement of a right leading to legal liability.
U
Underwriting: The process of evaluating risk and determining the terms, conditions, and pricing of an insurance policy.
Uninsured/Underinsured Motorist Coverage: Coverage for the insured’s injuries or property damage caused by a driver with insufficient or no insurance.
W
Waiver of Subrogation: A provision that prevents the insurer from seeking recovery from a third party after a claim has been paid.
Workers’ Compensation Insurance: Coverage that provides medical and wage replacement benefits for employees injured on the job.
Z
Zone Rating: A method used to calculate premiums based on the geographic location and its associated risks.
Disclaimer
This article is for informational purposes only and is not intended to stand alone as insurance or legal advice. Individual circumstances may vary, so when in doubt, contact Partridge-Zschau directly to discuss your specific needs.