Glossary

 

ACCIDENT

A sudden, unintended, unforeseen and unexpected event. To be insurable, a loss must be accidental with respect to acts of the insured.

 

ACT OF GOD

An unexplained happening contributed to a superior or natural force which is unpredictable and without human intervention.

 

ACTUAL CASH VALUE

"Actual Cash Value" is the replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.

 

ADDITIONAL INSURED

An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insured's policy provides a certain degree of protection. An endorsement is required to affect additional insured status. 

 

ADJUSTER

Individual employed by a properly and casualty insurance company. The adjuster evaluates the merits of each claim and makes recommendations to the insurance company.

 

AGENT

A person who acts on behalf of his customer to secure insurance coverage from one of several companies that they represent.

 

AGGREGATE LIMIT

This is the total amount an insurer will pay for all covered losses during the policy term.

 

ALL RISK

The term "All Risk" means there is coverage for all perils except those specifically excluded.

 

ANNIVERSARY DATE

The anniversary of the original date a policy was issued as shown in the declarations.

 

ASSUMED LIABILITY

Liability assumed under contract or agreement. More commonly known as contractual liability.

 

AUDIT

An audit is an examination of the insured's records to adjust the initial premium billed. The premium charged is an estimate based on projected exposures. Companies audit to determine what the actual exposure was and get the appropriate premium for the actual exposure. Many Companies don't give money back if the actual exposure was less than projected.

 

BASIC NAMED PERILS

Covered perils in a property insurance contract: fire, lightning, windstorm, civil commotion, smoke, hail, aircraft, vehicles, explosion and riot.

 

BI

A shorthand expression for "bodily injury."Commonly covered on both commercial auto policies as well as General Liability

 

BID BOND

Guarantees an owner, the "oblige," that the accepted contractor will actually undertake the work and be able to furnish performance and payment bonds. If he can't then the bonding company will have to pay the obligee the difference to award the contract to the next lowest bidder that can provide the required bonds.

 

BINDER

A binder is typically issued for 30 or 60 days and it serves as your policy until your policy is issued.

 

BINDING AUTHORITY

The authority given to your agent to bind your insurance with the company.

 

BROKER/AGENT

A person who acts or aids in soliciting, negotiating and procuring insurance on your behalf.

 

BUILDERS RISK INSURANCE

Insurance coverage that is designed to cover buildings in the course of construction.

 

Coverage customarily includes the property perils, including theft of materials at the job site and a smaller limit for materials in transit.

 

CARE, CUSTODY, OR CONTROL

Care, Custody, or Control refers to property in your possession that is owned by someone other than yourself. The property of others in your care, custody and control is typically excluded in General Liability policies. This encourages the contractor to be careful when handling or moving other people's property.

 

CERTIFICATE OF INSURANCE

A written description of a contractors insurance in effect as of the date and time of the certificate. The certificate does not confer any rights on the holder.

 

CLAIM

A loss turn into an insurance company to be evaluated for coverage by a claims adjuster.

 

CLAIM EXPENSE

The expense of adjusting a claim, such as investigation and attorneys' fees. It does not include the cost of the claim itself.

 

CLAIMS-MADE COVERAGE

Coverage is triggered when the claim is reported, not when the claim occurred. The claim needs to have happened and be reported during the policy term or within the extended reporting period which is typically 3 months.

 

COINSURANCE

Co-insurance is when you agree to carry an amount of insurance equal to a percentage of the total value of the property insured and if you don't a penalty is applied when they adjust the claim.

 

COMPLETED OPERATIONS LIABILITY COVERAGE

Coverage for bodily injury and property damage arising after the job has been completed. For example, you wire a house and the house burns down. It determined that your faulty wiring caused the loss. The insurance company will pay to rebuild the house under your completed operations coverage but they will not pay to rewire the house, this is your responsibility.

 

COMMERCIAL GENERAL LIABILITY COVERAGE

Commercial General Liability covers bodily injury and property damage to the general public for any claims that arise while you're working on the job and after the job is completed. It also provides coverage for personal and advertising injury, fire legal liability and medical payments. The policy will also defend any suit brought against you under these coverage's even if the allegations of the suit are groundless, false or fraudulent.

 

CONCEALMENT

An applicant who fails to reveal facts that are known. This can void the insurance contract whether the concealment was intentional or unintentional.

 

CONDITIONS

A part of the policy that sets forth the rights, duties and responsibilities of the parties to an insurance contract.

 

CONTRACTUAL LIABILITY COVERAGE

Commercial General Liability policies include coverage for liabilities you assumed under a written contract. This is sometimes referred to as a "hold harmless" agreement.

 

CONSEQUENTIAL LOSS

An indirect consequence of direct loss to property. An example would be loss of business income.

 

CONSTRUCTION BOND

Also referred to as a Performance Bond, guarantees the owner of a building under construction, that it will be completed. If the contractor cannot finish the work, the bonding company is obligated to see that the work is completed.

 

COVERAGE TRIGGER

In General Liability insurance, the "trigger" is the event that brings coverage into play. It may be either an occurrence of bodily injury or property damage; or, in a form with a claims-made trigger, the formal making of a claim.

 

DEC PAGE

The cover page of the policy that sets forth information that identifies the parties to the contract, what is covered, where, when, and at what limits, as well as rates and premiums.

 

DEDUCTIBLE

The amount deducted from the amount paid for the loss.

 

EARNED PREMIUM

The amount of the premium that has been "earned" by virtue of the fact that time has passed without claim. Company fees and State Tax & Stamp Fees are fully earned at inception.

 

EFFECTIVE DATE

The date that coverage starts.

 

EDP/COMPUTER COVERAGE

Covers all the property perils plus loss due to change in temperature or humidity, power surge or even spilling a drink on your keyboard.

 

ENDORSEMENT

An attachment to an insurance policy which changes that policy.

 

ERRORS & OMISSIONS (E & O)

Also known as Professional Liability Insurance is coverage for liability resulting from errors or omissions in the performance of professional duties.

 

EXCESS INSURANCE

Excess insurance adds a layer of insurance over what you already have on your General Liability policy. A typical General Liability policy has 1 Million Occurrence 2 Million Aggregate limit of liability. If you purchase 1 Million excess you will now have 2 Million Occurrence 3 Million Aggregate limit of liability.

 

EXCESS OR SURPLUS LINES MARKET

Is used when your agent secures coverage through non-admitted carriers because your states admitted carriers don't want to cover your type of operation at a reasonable premium. This adds surplus lines fees and taxes to the premium.

 

EXCLUSIONS

Limitations or restrictions of the coverage granted by the insuring agreement.

 

FIRE LEGAL LIABILITY

Covers your legal liability for property perils as a tenant in a building.

 

FIRST NAMED INSURED

A General Liability policy may have more than one party named as insured. In such cases, the first named insured is the one that is required to pay premiums, initiates (or receive notice of) cancellation, or make interim changes in the contract.

 

FLAT CANCELLATION

This type of cancellation means that the policy was cancelled without charge, by agreement.

 

FLOATER

Covers property that moves around. It's covered where ever it is at the time of loss.

 

FRAUD

This involves intentional deception which results in injury to another party.

 

GROSS PREMIUM

Total estimated premium paid and subject to audit.

 

HIRED AUTO

When you have a job that your own vehicle can't handle so you have to rent or hire a vehicle to get the job done. This endorsement is added to the business auto policy along with non-owned auto coverage.

 

HOLD HARMLESS AGREEMENT

A contractual assumption by one party of the liability exposure of another.

 

INDEMNIFICATION

Indemnification means to pay someone.

 

INLAND MARINE COVERAGE

Inland marine insurance pays loss to moving property. Inland marine policies became known as "floaters" since the property to which coverage was originally extended was essentially "floating." Contractors will typically cover their construction tools under this policy.

 

INSURABLE INTEREST

To collect under an insurance policy, an insured must have at the time of loss or damage an insurable interest in the property.

 

INSURANCE

Spreads the risk of losses by covering a homogeneous group.

 

INSURED

The individual or organization for whom insurance protection is provided by an insurance policy.

 

INSURER

Company offering protection through the sale of an insurance policy to an insured.

 

LIABILITY

Legal obligation to perform or not perform specified acts(s).

 

LIABILITY INSURANCE

Provides protection from lawsuits of others.

 

LOSS

Amount paid including expense to adjust the claim.

 

LOSS CONTROL

The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.

 

LOSS RATIO

The ratio of incurred losses and loss-adjustment expenses to net premiums earned.

 

LOSS RESERVE

For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.

 

LOST POLICY RELEASE (LPR)

Used to cancel a policy rather than returning the original policy.

 

MANAGING GENERAL AGENT (MGA)

An contractors insurance agent standing between an insurer and other agents. The MGA sells to retail agents, who then sell to the consumer.

 

MEDICAL PAYMENTS -- GENERAL LIABILITY

The only non-negligence coverage in the GL policy that is designed to pay without regard to fault.

 

MINIMUM PREMIUM

A contractors insurance company's lowest charge for an insurance policy. The minimum amount an issuer will accept to issue a policy.

 

MOTOR VEHICLE RECORD (MVR)

An official record of a driver's accidents and traffic violations kept by the licensing state(s). Often used to determine eligibility and/or premiums for auto insurance.

 

NAMED INSURED

The individual(s) or organization(s) who the declaration section of an insurance policy specifically names as the insured.

 

NEGLIGENCE

A tort, a civil wrong not based upon a contract. It is the failure to act as a reasonable and prudent person would have done in similar circumstances.

 

NONOWNED AUTO

Employees that are using their own vehicle in your Company. Your policy is excess over the employee's policy if you have this coverage.

 

OCCURRENCE (CGL)

This term means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

 

OWNERS' OR CONTRACTORS' PROTECTIVE LIABILITY COVERAGE

This is where you buy a policy to cover someone else. This coverage is often required by Cities.

 

POLICY LIMIT

The policy limit is the dollar amount of coverage shown in the contract.

 

POLICY PERIOD

This is the period of time a policy is in effect.

 

PREMIUM

The premium is the money consideration which the insured pays for the policy term. It is an estimate in GL policies and is subject to Audit.

 

PRODUCTS AND COMPLETED OPERATIONS AGGREGATE

Liability arising out of the insured's products or business operations conducted away from the insured's premises once those operations have been completed or abandoned.

 

PRODUCTS LIABILITY

The liability for bodily injury or property damage incurred by a merchant or manufacturer as a consequence of some defect in the product sold or manufactured.

 

PROOF OF LOSS

A written document which must be filled by an insured when a loss occurs under a property insurance policy.

 

PRO-RATA CANCELLATION

When a policy is cancelled and there is no penalty charged against the premium to be returned.

 

RATING BUREAU

A private organization that classifies and promulgates rates.

 

REINSTATEMENT

Restoration of a policy that has lapsed because of non-payment of premium after the grace period has expired.

 

REPLACEMENT COST COVERAGE

This form of insurance provides coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy. No deduction is taken for depreciation in arriving at the proper amount of insurance needed to comply with the co-insurance clause.

 

RISK RETENTION GROUPS (RRG)

Contractors Insurance liability companies owned by their policyholders. Membership is limited to people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability. These entities are formed under the Liability Risk Retention Act of 1986. Under law, risk retention groups are precluded from writing certain coverage's, most notably property lines and workers' compensation. They predominately write medical malpractice, general liability, professional liability, products liability and excess liability coverage's.

 

SHORT RATE CANCELLATION

This is a cancellation with a penalty. Generally when the insured cancels, it is on a short-rate basis.

 

STATED AMOUNT

Amends the valuation clause on a policy to include an amount that is "stated" as the value of the item(s) being insured. Usually, these policies pay the lesser amount of the ACV of the damaged property, the cost of repairing or replacing the property, or the stated amount.

 

SUBROGATION

The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.

 

TAIL COVERAGE

Coverage for claims made after a claims-made liability policy has terminated; the extended reporting or discovery period.

 

TERMINATION DATE

The date that coverage expires on an insurance contract

 

UMBRELLA LIABILITY

A liability contract with limits covering over top of primary liability coverage's and, subject to a self-insured retention (deductible), covering exposures otherwise uninsured.

 

UNDERINSURED MOTORISTS COVERAGE

Coverage for the insured and passengers whenever the at-fault driver in an accident has auto liability insurance with lesser limits than the insured's. This coverage lies atop "uninsured motorists coverage" or atop the at-fault driver's low limit automobile liability insurance.

 

UNDERLYING INSURANCE POLICY

The policy providing initial coverage for a claim until its limit of liability is reached and an umbrella or excess policy's coverage is triggered.

 

UNDERLYING LIMITS

The limits of liability of the policy(ies) underlying an umbrella or excess policy.

 

UNDERWRITER

One who researches and then accepts, rejects, or limits prospective risks for an Insurance Company.

 

UNDERWRITING

The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not quality.

 

UNEARNED PREMIUMS

That part of the premium applicable to the unexpired part of the policy period.

 

VALUABLE PAPERS COVERAGE

Coverage for reconstructing documents and records, including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts. It covers the cost of research to reconstruct damaged records.

 

WAIVERS OF SUBROGATION

The provision for one party to waive its rights of recovery against another. Your Insurance Company adds an endorsement to comply with this request, for a small premium charge.

 

WRAP UP POLICY

One policy that covers a specific jobsite and everyone who works on that site.

 

X, C, AND U EXCLUSIONS

Some policies exclude X, C and U or one or more of these hazards; Explosion ("X") Hazard, Collapse ("C") Hazard and Underground ("U") damage.