Glossary of Insurance Terms

A | B | C | D | E | F | H | I | J | L | M | N | O | P | R | S | T | U | V | W

A

ACT OF GOD - A flood, an earthquake or other event that is with no human intervention and that could not have been prevented by reasonable care or foresight. The result of natural causes.

ACTUAL CASH VALUE - The sum of money required to pay for damages or lost property, computed on the basis of replacement value less its depreciation by obsolescence or general wear.

ADDITIONAL INSURED - An entity, other than the named insured, on a policy who is protected by the terms of the policy.

ADDITIONAL LIVING EXPENSE - Coverage providing funds to pay for increased living costs which result from damage covered by the policy.

AGREED VALUE - An agreement by an insurer to pay a specified amount of money to or on behalf of the insured. See also Valued Policy.

ALL RISK - Insurance against loss or damage to property arising from any fortuitous cause, except as specifically excluded. See Special Coverage Form.

APPLICATION - A form on which the prospective insured states facts requested by the insurance company and on the basis of which, together with any information from other sources, the insurance company decides whether or not to accept the risk, modify the coverage offered, or decline the risk.

APPRAISAL - A survey of property made for determining its insurable value or the amount of loss sustained.

APPURTENANT STRUCTURES - A structure pertaining or belonging to the insured structure, such as a tool shed. Appurtenant structures are provided for in the Homeowners policy and other dwelling forms.

ASSIGNED RISK - A risk which underwriters do not care to insure, but because of state law or otherwise, the insured must be protected and the insurance is therefore handled through the state and assigned companies.

ASSUMED LIABILITY - Liability which would not rest upon a person except that he has accepted responsibility by contract expressed or implied. This is also known as contractual liability.

AUTOMATIC COVER - A provision in many forms of property-liability insurance to cover increasing values, newly acquired and changing interests, usually for a specified period and limited in amount.


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B

BAILEE - A person or concern having possession of property committed in trust from the owner.

BASIC COVERAGE FORM - Property forms which provide basic coverages on a named perils basis. These forms generally provide the most limited coverage, which is surpassed by Broad Forms and Special Forms.

BINDER - In lines other than life and health, a binder is an acknowledgment that insurance applied for is in force whether or not premium settlement has yet been made or the policy issued.

BLANKET INSURANCE - (1) Property insurance that covers more than one type of property in one location in one policy or form instead of under separate items, or one or more types of property at more than one location. (2) A contract of health insurance that covers all of a class of persons not individually identified.

BODILY INJURY LIABILITY - The liability which may arise from injury or death of another person.

BOND - An obligation of the insurance company to protect one against financial loss caused by the acts of another.

BROAD FORM - Property forms which provide coverage on a named perils basis. This form normally adds the Extended Coverage and Vandalism and Malicious Mischief coverages.

BROKER - One who represents an insured in the solicitation, negotiation or procurement of contracts of insurance, and who may render services incidental to those functions. By law the broker may also be an agent of the insurer for certain purposes such as delivery of the policy or collection of the premium.

BUILDERS RISK INSURANCE - Insurance against loss to buildings or structures in the course of construction.


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C

CANCELLATION - Termination of contract of insurance in force by voluntary act of the insurance company or insured, affected in accordance with provisions in the contract or by mutual agreement.

CARRIER - An insurance company which “carries” the insurance.

CASUALTY INSURANCE - Insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as Plate Glass, Crime, Boiler and Machinery and Aviation.

CATASTROPHE HAZARD - The risk of loss by reason of simultaneous occurrence of a peril to which all insured in a group (or very large number of insureds) are subject.

CERTIFICATE - A statement evidencing that a policy has been written and stating the coverages in general.

CIVIL COMMOTION - An uprising of a large number of people, usually resulting in damage to property. This term is generally used to describe one of the Extended Coverage perils.

CLAIM - The demand for benefits as provided by the policy.

CLAUSE - A term used to identify a particular part of a policy or endorsement.

COINSURANCE - (1) In property insurance, a clause under which the insured shares in losses to the extent that he is underinsured at the time of loss. (2) In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion.

COMPREHENSIVE PERSONAL LIABILITY POLICY (CPL) - A personal liability contract. It provides liability insurance coverage for the individual and family needs arising out of numerous personal activities and situations, such as the ownership of residential property, ownership of pets, sports activities and many other everyday activities.

COMPULSORY INSURANCE - Any form of insurance which is required by law.

CONCEALMENT - The withholding of facts by an applicant for insurance that affects an insurance risk or loss.

CONCURRENT INSURANCE - Two or more insurance policies with the same conditions, which cover the same interest in the same property. Also, two bonds, not necessarily identical in their provisions, providing common coverage for the same interests.

CONSTRUCTIVE TOTAL LOSS - A partial loss of sufficient degree to make the cost of repairing more than the property is worth.

CONTRACT OF INSURANCE - A contract whereby an insurance company agrees to indemnify an insured for losses, provide other benefits, or render services to, or on behalf of, an insured. The contract of insurance is often called an “insurance policy”.

CONTRACTUAL LIABILITY - Liability assumed under any contract or agreement. Coverage is generally limited in liability policies.

CONTRIBUTION - (1) The share of a loss payable by an insurer when contracts with two or more insurers cover the same loss. (2) The insurer's share of a loss under a coinsurance or similar provision.

CONVERSION - (1) Wrongful use of property by one in lawful possession of it. (2) The change of one policy form to another, usually without evidence of insurability.

COVERAGE - Scope of the protection provided under a contract of insurance.


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D

DEBRIS REMOVAL CLAUSE - A clause often added to a property insurance policy under which the company assumes liability for the removal of debris resulting from damage to the property covered by the peril insured against.

DECLARATIONS - A term used in insurance for the portion of the contract which contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.

DEDUCTIBLE - A provision or clause in an insurance policy that the first given number of dollars or percentage of expense will not be reimbursed.

DEFAMATION - Any derogatory statement which is designed to injure a person's business or reputation. Defamation can be accomplished as libel or slander.

DEPRECIATION - Decrease in the value of property over a period of time due to use, wear, tear and obsolescence.

DIRECT LOSS (OR DAMAGE) - A loss which is a direct consequence of a particular peril. Fire damage to a refrigerator would be a direct loss. Spoiling of food in the refrigerator as a result of the fire damage would be an indirect loss.


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E

EARNED PREMIUM - That portion of a premium for which the policy protection has already been given.

EARTH MOVEMENT - A peril including landslide, mudflow, earth sinking, rising or shifting and earthquake. Usually excluded on homeowner and commercial property policies.

ELECTRONIC DATA PROCESSING COVERAGE - Specialized type of insurance designed to cover computer equipment, data systems, information storage media and expenses or income loss related to the covered damage of this equipment.

EMPLOYERS LIABILITY INSURANCE - Coverage against common law liability of an employer for injuries or sickness to employees, as distinguished from liability imposed by a workers’ compensation law.

ENDORSEMENT - A form attached to the policy bearing the language necessary to change the terms of the policy to fit special circumstances.

EXCLUSIONS - Causes, conditions or property listed in the policy which are not covered and for which no benefits are payable.

EXPIRATION - The date upon which a policy will cease to cover, unless previously canceled.

EXTENDED COVERAGE - A common extension of property insurance beyond coverage for fire and lightning. Extended coverage adds insurance against loss by the perils of windstorm, hail, explosion, riot and riot attending a strike (civil commotion), aircraft damage, vehicle damage, smoke damage and volcanic eruption.


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F

FAIR PLAN - Fair Access to Insurance Requirements. A pooling plan reinsured by the United States government that makes insurance available to those in high risk areas who cannot obtain insurance through normal channels. Coverage for fires and allied perils is available, after inspection of the premises.

FIRE INSURANCE - Insurance contracts that indemnify an insured for loss caused by the destruction of the insured's property for a variety of perils, including fire.

FLAT CANCELLATION - Cancellation of a policy free of any charge or penalty to the insured, as contrasted to short rate or pro-rata cancellation.

FLOATER POLICY - A policy under the terms of which protection follows moveable property, covering it wherever it may be.

FLOOD INSURANCE - A form of insurance designed to reimburse property owners from loss due to the defined peril of flood. Usually sold in connection with a government Flood Insurance plan.

FORTUITOUS EVENT - An unforeseen accident.


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H

HAZARD - A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, burglary, and explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises, and uninspected boilers are hazards.

HOLD HARMLESS AGREEMENT - A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. For example, a typical lease may provide that the lessee must “hold harmless” the lessor for any liability from accidents arising out of the premises.

HOMEOWNERS POLICY - A Property and Liability Insurance contract that provides insurance against any of the Property and Liability perils to which a homeowner or renter is exposed.


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I

IMPROVEMENTS AND BETTERMENTS - Additions or changes made by a lessee at his own cost to a building which he is occupying which enhance its value. These become part of the building and require special insurance consideration.

INDEMNIFY - To restore the victim of a loss, in whole or in part, by payment, repair or replacement.

INDIRECT LOSS (OR DAMAGE) - Loss resulting from a peril, but not caused directly and immediately thereby. For example: Loss of property due to fire is a direct loss, while the loss of rental income as the result of the fire would be an indirect loss.

INFLATION GUARD ENDORSEMENT - An endorsement which provides for periodic increases in the amount of insurance in effect on buildings so as to keep it “to value” considering the effect of inflation on building replacement costs. The term “Inflation Guard” is used in connection with Homeowners policies. In Commercial policies the similar endorsement is called the “Automatic Increase in Insurance Endorsement.”

IN-FORCE - Insurance on which the premiums are being paid or have been fully paid. In life insurance, usually refers to insurance by face amount. In health, usually refers to premium volume being paid to insurance company.

INLAND MARINE INSURANCE - A branch of insurance that developed from the insuring of shipments which did not involve ocean voyages. Exposures eligible for this form of protection are described in the nationwide definition of Marine Insurance. Such diverse properties as bridges tunnels, jewelry and furs can be written under Inland Marine forms.

INSPECTION - Checking on facts about an applicant or claimant.

INSURABLE INTEREST - Any interest in a subject of insurance or any legal relation to it of such a nature that a certain happening might cause monetary loss to the insured.

INSURABLE RISK - A risk which meets most of the following requisites: (1) The loss insured against must be capable of being defined. (2) It must be accidental. (3) It must be large enough to cause a hardship to the insured. (4) It must belong to a homogeneous group of risks large enough to make losses predictable. (5) It must not be subject to the same loss at the same time as a large number of other risks. (6) The insurance company must be able to determine a reasonable cost for the insurance. (7) The insurance company must be able to calculate the chance of loss.

INSURANCE - A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured.

INSURANCE COMPANY - (1) Every person or company engaged in the business of making contracts of insurance. (2) The party to an insurance arrangement who undertakes to indemnify for losses, provide other pecuniary benefits, or render service.

INSURANCE POLICY - Broadly, the entire written contract of insurance. More narrowly, the basic written or printed document, as distinguished from the forms and endorsements added thereto.

INSURANCE SERVICES OFFICE (ISO) - An organization of the Property and Liability Insurance business designed to gather statistics, promulgate rates, and develop policy forms.

INSURANCE TO VALUE - Insurance written in an amount approximating the replacement value of the property insured.

INSURED - The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service. In pre-paid hospital service plans, the insured is called the subscriber.

INSURER - (See Insurance Company.)

INSURING AGREEMENT (OR CLAUSE) - That portion of an insurance contract which states the perils insured against, the persons and/or property covered, their locations, and the period of the contract.


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J

JOINT TENANCY - Ownership of property shared equally by two or more parties under which the survivor assumes complete ownership. This is different from a tenancy in common where the heirs of a deceased party to the tenancy inherit his or her share.


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L

LAPSE - Termination of a policy because of failure to pay the premium.

LESSEE - The person to whom a lease is granted.

LESSOR - The person granting a lease.

LIABILITY - Any legally enforceable obligation.

LIABILITY INSURANCE - Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.

LIABILITY LIMITS - The sum or sums beyond which a liability insurance company does not protect the insured on a particular policy.

LIMIT OF LIABILITY - The maximum amount which an insurance company agrees to pay in case of loss.

LOSS - Generally refers to (1) the amount of reduction in the value of an insured's property caused by an insured peril, (2) the amount sought through an insured’s claim, or (3) the amount paid on behalf of an insured under an insurance contract.

LOSS OF USE INSURANCE - Coverage to compensate an insured for the loss of use of his property if it cannot be used because of a peril covered by the policy.

LOSS PAYABLE CLAUSE - A provision in Property Insurance contracts that authorize payment to persons other than the insured to the extent that they have an insurable interest in the property. This clause may be used when there is a lien or loan on the property being insured, and it protects the lender.


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M

MALICIOUS MISCHIEF - Similar to vandalism. Purposely damaging the property of another.

MARKET VALUE - The price for which something would sell based on current market conditions.

MISREPRESENTATION - The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges or estimated future dividends of any policy.

MONOLINE POLICY - Any insurance coverage written as a single line policy.

MORAL HAZARD - A condition of morals or habits that increase the probability of a loss from a peril.

MORTGAGE (OR MORTGAGEE) CLAUSE - A provision attached to a property insurance policy covering mortgaged property stating that the loss shall be payable to the mortgagee as his interest may appear and that the mortgagee’s right of recovery shall not be defeated by any act or neglect of the insured and giving the mortgagee other rights and privileges.

MORTGAGE INSURANCE POLICY - In life and health insurance, a policy intended to be used to pay off the balance due on a mortgage or meet the payments on a mortgage as they fall due on or after the death or disability of the insured.

MORTGAGEE - The creditor to whom a mortgage is given and who lends money on the security of the value of the property mortgaged.

MORTGAGOR - The debtor who receives money and in turn grants a mortgage on his property as security for a loan.


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N

NAMED INSURED - Any person, firm or corporation, or any member thereof, specifically designated by name as insured(s) in a policy as distinguished from the others who, though unnamed, are protected under some circumstances. A common application of this latter principle is in liability policies wherein by a definition of “insured” protection is extended to interests (not designated by name) according to their status or in particular situations or circumstances.

NAMED PERIL POLICIES - Names peril policies specify what perils are insured against, contrary to so-called all risk policies.

NEGLIGENCE - Failure to use the degree of care which an ordinary person of reasonable prudence would use under the given circumstances. Negligence may be constituted by acts of either omission or commission or both.

NONRENEWAL - Termination of insurance coverage at an expiration date or anniversary date. This action may be taken by an insurer who refuses to renew, or by an insured who rejects a renewal offer.

NON-ASSIGNABLE - A policy that the owner cannot assign to a third party. Most policies are non-assignable unless approval is given by the insurer.


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O

OCCUPANCY - In insurance, this term refers to the type and character of the use of property in question.

OCCURRENCE - An event that results in an insured loss. In some lines of insurance, such as Liability, it is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected nor intended by the insured.

OFF PREMISES - A clause in property insurance extending coverage away from the premises described in the policy. The amount of coverage away from the premises is usually restricted to a percentage of the total coverage on the premises.


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P

PACKAGE POLICY - Any insurance policy including two or more lines or types of coverage in the same contract.

PARTIAL LOSS - A loss under an insurance policy which does not either (1) completely destroy or render worthless the insured property, or (2) exhaust the insurance applying thereto.

PERIL - Cause of a possible loss.

PERSONAL ARTICLES FLOATER - Provides all risk coverage for valuable items such as furs, jewelry, cameras, silverware, etc. formerly insured under separate contracts. The items are generally listed by description and value.

PERSONAL EFFECTS FLOATER - An Inland Marine policy covering personal effects worldwide usually carried by a tourist.

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 of a person's right to privacy.

PERSONAL INJURY COVERAGE - Liability insurance coverage for third party claims for damages which are other than physical such as, libel, slander, false arrest, wrongful eviction, invasion of privacy, etc.

PERSONAL LINES - Refers to insurance for individuals and families, such as private passenger automobile insurance and homeowner insurance.

PERSONAL PROPERTY - Any property of an insured other than real property. Homeowner policies protect the personal property of family members, and commercial forms are used to protect many types of business personal property.

PERSONAL PROPERTY FLOATER - A policy covering all personal property world-wide, including insured’s residence.

PERSONAL PROPERTY OF OTHERS - Property, other than real property, which is not owned by an insured. Liability forms have traditionally excluded coverage for property of others in an insured’s care, custody or control. Homeowner forms and commercial property forms provide some coverage for property of others.

PHYSICAL HAZARD - The material, structural or operational features of the risk itself, apart from the morale or moral hazards of the persons owning or managing it.

PILFERAGE - Petty theft, especially theft of articles in less than package lots. POLICY - The written contract effecting insurance, or the certificate thereof, including all clause, riders, endorsements, and papers attached and made a part thereof.

POLICY PERIOD (OR TERM) - The period of time during which the policy contract affords protection.

PREFERRED RISK - An insurance classification indicating a risk that is superior to the average risk on which the rate has been calculated and thus eligible for a reduced rate.

PREMISES - The particular location of property or a portion thereof as designated in a policy.

PREMIUM - (1) Part of the consideration for the insurance. (2) The periodic payment made to keep a policy in force. (3) In annuities, the purchase payment.

PREMIUM NOTICE - A notice from the insurance company to the policyowner that a premium is, or will be, due on a given date.

PROFESSIONAL LIABILITY INSURANCE - Liability insurance to indemnify professionals, eg. doctors, lawyers, architects, etc. for loss or expense resulting from claims of malpractice, error, or mistake committed or alleged to have been committed by the insured in his professional capacity.

PROHIBITED RISK - Any class of business which an insurance company will not insure under any condition.

PROOF OF LOSS - A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to provide the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.

PROPERTY DAMAGE LIABILITY INSURANCE - Protection against liability for damage to the property of another not in the care, custody and control of the insured, as distinguished from liability for bodily injury. In the majority of cases, property damage insurance is written in connection with the bodily injury protection, the premiums and limits of insurance being distinct.

PROPERTY INSURANCE - Insurance which indemnifies a person with an interest in physical property for its loss or the loss if its income-producing ability.

PROTECTED - A subject of insurance located in an area protected by a fire department.

PROTECTION - (1) Term used interchangeably with the word “coverage” to denote the insurance provided under the terms of a policy. (2) Term used to indicate the existence of fire-fighting facilities in an area known as a “protected” area.

PROXIMATE CAUSE - The effective cause of loss or damage. An unbroken chain of cause and effect between the occurrence of an insured peril or a negligent act and resulting injury or damage to property.


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R

RATE - The per unit cost of insurance.

RATED - Usually used in combination, rated-up or rated policy. A policy issued with an extra premium charge because of physical or moral impairment.

RATING BUREAU - An organization that classifies and promulgates and, in some cases complies data, and measures hazards of individual risks in terms of rates in a given territory.

REDUCTION OF RISK - Taking steps to reduce the probability or severity of a possible loss. For example, installing alarms and sprinkler systems to reduce the risk of fire loss. One of the four major risk management techniques. See Risk Management.

REIMBURSEMENT - Payment of an amount of money related to the amount of the loss to or on behalf of the insured upon the occurrence of a defined loss.

REINSTATEMENT - (1) Putting a lapsed policy back in force. (2) The payment of a claim under some forms of insurance reduces the principal amount of the policy by the amount of the claim. Provision is usually made for a method of reinstating the policy to its original amount. This may be done automatically either with or without premium consideration or at the request of the insured.

REINSURANCE - (1) A contract of indemnity against liability by which the insurance company procures other insurance to insure it against loss or liability by reason of the original insurance. (2) Insurance by one insurance company of all or part of a risk accepted by it with another insurance company which agrees to reimburse the insurance company for the portion of the claim reinsured.

REJECTION - (1) Refusal by an insurer to underwrite a risk. (2) Sometimes used to refer to the refusal or denial of a claim by an insurer.

RELEASE - (1) To give up, abandon, and discharge a claim or an enforceable right of one against another. (2) Name of the instrument or form evidencing such an act.

RENEWAL - The continuation in full force and effect of something that is about to expire. With an insurance policy it is made either by the issuance of a new policy or renewal receipt or certificate, to take effect upon the expiration of the old policy.

RENTAL VALUE INSURANCE - Insurance that provides indemnity for loss of the rental value of property when the owner or the tenant (if he remains liable for the payment of rent) is deprived of the use of the property because of its damage by a peril insured against.

REPLACEMENT COST - The cost of replacing property without deduction for depreciation.

REPRESENTATIONS - On an application, facts that the applicant represents as true and accurate to the best of his or her knowledge and belief. In contrast to warranty (see Warranty).

RESERVE - (1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose.

RETURN PREMIUM - The amount due the insured if a policy is cancelled, reduced in amount or reduced in rate.

RISK - (1) A chance of loss. (2) A person or thing insured.

RISK MANAGEMENT - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk by insurance.


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S

SALVAGE - Property taken over by an insurance company to reduce its loss.

SCHEDULE - The list of individual items covered under one policy as the various buildings, animals and other property in property insurance.

SELF-INSURANCE - Making financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated.

SETTLEMENT - A policy benefit or claim payment. It connotes an agreement between both parties to the policy contract as to the amount and method of payment.

SHORT RATE - The earned premium, including penalty, for insurance or bonds canceled by the insured before the end of the policy period or term of bond.

SHORT-TERM POLICY - A policy written for a period of less time than is normal for that type of policy.

SMOKE DAMAGE - Damage caused by the smoke from a fire in contrast to damage caused by the actual combustion.

SPECIAL COVERAGE FORM - Any of the commercial or personal lines property forms which provide coverage on an all-risk type basis. These forms provide the broadest coverage and do not list covered perils, but do include a list of exclusions.

SPECIFIC RATE - A rate applying to an individual property.

STATED AMOUNT - Relating to an agreement by the insurance company to pay a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. See Reimbursement benefit.

SUBROGATION - The legal process by which an insurance company seeks, from a third party who may have caused the loss, recovery of the amount paid to the insured.

SUPPLEMENTARY PAYMENTS - A provision in most liability policies under which the insurer agrees to pay defense costs, premiums on various bonds, interest accruing after a judgment, and other reasonable expenses in addition to the limit of liability.


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T

TENANTS POLICY - A Homeowners form which is specifically designed for people who rent.

THIRD PARTY INSURANCE - Protection of the insured against liability for damage to or destruction of the bodies or property of others.

TIME ELEMENT INSURANCE - A general term referring to those coverages that protect against indirect losses resulting from damage to described property, where the amount of such losses depends on the length of time over which such losses accumulate. Examples include Rent insurance, Leasehold insurance, Business Interruption insurance, and Extra Expense insurance.

TIME LIMITS - The limits of time within which notice of claim and proof of loss must be submitted.

TOTAL LOSS - A loss of sufficient size so that it can be said there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay.

TRIP TRANSIT POLICY - An insurance policy for loss to personal property on a single trip between two specified locations.


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U

UMBRELLA LIABILITY POLICY - A liability policy designed to provide liability protection above and beyond that provided by standard liability contracts.

UMPIRE - For Property coverage, if a company and a claimant fail to agree on the amount of loss, each may appoint an appraiser, and these in turn select an umpire. A decision by any two of the three is binding.

UNDER-INSURANCE - A condition in which not enough insurance is carried to cover the insurable value and, especially, to satisfy a coinsurance clause in property insurance.

UNDERWRITING - The process of evaluating a risk for the purpose of issuing insurance coverage on it.

UNEARNED PREMIUM - That portion of an advance premium that has not yet been used for coverage written. In the case of an annual premium, at the end of the first month of the premium period, 11 months of the premium would still be “unearned”.

UNOCCUPIED - Refers to property which may be furnished or have furnishings in it but is not occupied or being lived in. The Standard Fire policy prohibits unoccupancy beyond a specified period of time. This term is contrasted with vacant, which means that there is nothing within the building.


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V

VANDALISM - Used with Malicious Mischief. Willful physical damage to property.

VANDALISM AND MALICIOUS MISCHIEF (V&MM) - Damage or destruction to property which is willful. This coverage can be purchased under many property forms and is automatically covered under most Homeowners policies.

VACANT - A term used in Property Insurance to describe a building that has nothing in it. This goes one step beyond the description of unoccupied. The Standard Fire policy prohibits vacancy beyond a specified period of time.

VALUED POLICY - A policy which states that in the event of a total loss, a specified amount will be paid, that being the amount stated in the policy. The effect is to eliminate the need for determining the actual cash value of an it

VOID - A term used to describe a policy contract that is completely free of all legal effect.

VOIDABLE - A policy contract that can be made void at the option of one or more of the parties to it. An example would be a Property Insurance policy which is voidable by the insurer if the insured commits certain acts.


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W

WAIVER - (1) The giving up or surrender of a right or privilege that is known to exist. (2) A rider excluding liability for a stated cause of accident or sickness. (3) A provision agreeing to forego premium payment during a period of disability.

WARRANTY - A statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the untruth may not have been known to the person giving the warranty, the contract may be voided whether or not the untruth or inexactness is material to the risk. Statements on life and health insurance applications are, in the absence of fraud, not warranties but representations. (See Representations).

WORKERS COMPENSATION - (1) A schedule of benefits payable to an employee for injury, disability, dismemberment, disease or death as a result of occupational hazard. The payments are a liability of the employer. (2) Insurance agreeing to pay the Worker's Compensation benefits required by law on behalf of the employer.

WRITTEN - (1) Insurance for which the application has been taken and the policy has been issued. (2) The entire amount of insurance premium on contracts issued by the insurance company.


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