ACCIDENT: An unexpected event or circumstance without deliberate intent.
ACCREDITED CUSTOMER SERVICE REPRESENTATIVE (ACSR): Is a professional designation awarded by the National Alliance for Insurance Education and Research. To receive the designation, designates must attend 7, one day classes and pass the corresponding multiple choice exam.
ACTIVE SHOOTER INSURANCE: Covers the liability that companies or institutions have if they are found not to have taken the needed precautions to prevent gun rampages. It also covers the “on the scene” costs of a shooting incident, as well as the expense of any counseling or consulting that would be needed after a tragic event.
ACTUAL CASH VALUE (ACV): Repayment value for loss or damage to property; in most cases, it is replacement cost minus depreciation.
ACTUAL LOSS SUSTAINED: You will have coverage for your actual loss of business income, including maintenance fees for up to 12 months. In other words, you do not have to go through the process of setting a separate limit as long as it doesn’t exceed 12 months.
ACTUARY: A business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends, and other applicable insurance industry standards.
ADDITIONAL LIVING EXPENSES: Coverage under a homeowner’s or renter’s insurance policy that covers the additional costs of living that are incurred by the policyholder, should the policyholder be temporarily displaced from their place of residence due to a covered cause of loss.
ADJUSTER: A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.
ADMITTED COMPANY: An insurance company licensed to do business in a state(s), domiciled in an alternative state or country.
ADVERTISING INJURY LIABILITY: a component of commercial general liability insurance that protects the insured against claims of stolen ideas, invasion of privacy, libel, slander, and copyright infringement related to advertising. Claim Example: An association plagiarizes a newspaper or magazine article or publishes an article in the community newsletter without obtaining written approval from the author or publisher.
AGENT: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
AGGREGATE: The maximum dollar amount or total amount of coverage payable for multiple losses, during a policy period.
AGREED AMOUNT: A property insurance provision in which the insurer agrees to waive the coinsurance requirement.
ALIEN COMPANY: An insurance company formed according to the laws of a foreign country. The company must conform to state regulatory standards to legally sell insurance products in that state.
ALL IN COVERAGE: The broadest coverage available for a condominium, offering coverage for not only the structure itself, but all fixtures, as well as improvements and betterments that are part of the building or structure, including floor coverings, wall coverings, fixtures, cabinetry, and built-in appliances such as those used for refrigerating, ventilating, cooking, dishwashing, and laundering, on a regardless of ownership basis. In other words, all interior fixtures and built-ins that become a permanent part of the unit would be covered.
AM BEST RATING: An evaluation published by AM Best Company of all life, property, and casualty insurers domiciled in the United States and US branches of foreign property insurer groups active in the United States. The ratings are often used to determine the claims-paying ability, suitability, service record, and financial stability of insurance companies.
APPRAISAL: An estimate of value.
ARBITRATION: A binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.
ASSIGNED RISK: A governmental pool established to write business declined by carriers in the standard insurance market.
AUTHORIZED COMPANY: An insurer licensed or admitted to do business in a particular state.
AUTO PHYSICAL DAMAGE: Coverage (including collision, vandalism, fire, and theft) that insures against material damage to the insured’s vehicle.
AUTOMOBILE LIABILITY INSURANCE: Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.
BACK-UP OF SEWERS & DRAINS: Water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump, or related equipment. Claim Example: (1) A drain was clogged, causing water back-up causing damage to the basement and equipment kept there. (2) Accumulation of surface water- creek rose due to heavy rains causing a flood.
BARE WALLS: In addition to the structure, coverage is only provided up to the drywall of the exterior walls of the unit, often not including the finished surfaces and/or interior walls of the unit. The owners have to have more insurance and the condominium less when the governing documents indicate the master policy must be written this way.
BLANKET COVERAGE: A single policy on an insured property that covers more than one type of property at the same location, the same kind of property at more than one location, or two or more kinds of property at two or more locations.
BOATOWNERS/PERSONAL WATERCRAFT: Covers damage to pleasure boats, motors, trailers, boating equipment, and personal watercraft as well as bodily injury and property damage liability to others.
BODILY INJURY: Physical injury including sickness, death, or disease to a person.
BOILER & MACHINERY: See Systems Breakdown. Claim Example: A boiler leaks due to an unknown cause and repairs are covered to get the boiler back up and running.
BROKER: An individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.
BUILDER’S RISK POLICY: Insures against loss to buildings and materials incidental while in the course of construction.
BUILDERS SPEC A.K.A. ORIGINAL SPECIFICATIONS A.K.A. SINGLE ENTITY: Under this type of policy, the building would be rebuilt in accordance with the condominium’s original plans and specifications. Coverage would include property that was originally included in the “units” as they were initially constructed. Any improvements or betterments made by the current or prior owners would be the owner’s responsibility.
BUILDING LIMIT: A building limit is the maximum amount of money an insurance company will pay you for a covered loss. Claim Example: An electrical fire causes fire, smoke, and water damage to units and common elements. Additional damage can be caused as a result of firefighters and first responders gaining access.
BUSINESS INCOME: Provides coverage for loss of income due to a covered claim. Income includes maintenance fees, rental income, sublet fees, laundry room income, and parking fees. Claim Example: Large loss occurred, and residents had to move out while the repairs were completed. They did not pay maintenance fees while they were out of their unit (this is not where alternate living expenses would apply). The building was able to file for the loss of business income on an incurred basis.
BUSINESS INTERRUPTION: Covers loss of income that cannot be collected as a result of property damage from a covered cause of loss.
BUSINESS OWNERS POLICY: A policy that includes Property, General Liability, and Business Interruption coverage.
BUSINESS PERSONAL PROPERTY: Business Personal Property covers nearly all items of value that aren’t considered a structure, fixture, automobile, watercraft, or aircraft. This would include items such as desks, chairs, tools, equipment, appliances, furniture, etc. BPP can also mean mobile equipment, which includes items such as Bobcats, forklifts, and other mobile pieces of equipment that aren’t meant for use on public roads and are not required to be licensed with the Department of Motor Vehicles. Claim Example: There was a fire in the building, and the fire destroyed the couches in the common area.
CASUALTY INSURANCE: Liability insurance providing coverage for negligent acts and omissions by an insured individual or organization.
CATASTROPHE LOSS: A large magnitude loss with little ability to forecast.
CEDED PREMIUM: Amount of premium an insurance (ceded) company pays to purchase reinsurance.
CEDING COMPANY: An insurance company that transfers risk by purchasing reinsurance.
CERTIFICATE OF INSURANCE: A certificate of insurance is a document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals.
CERTIFIED INSURANCE COUNSELOR (CIC): A professional designation awarded by the National Alliance for Insurance Education & Research. To receive the designation, designates must pass five CIC institutes, each consisting of 2½ days of coursework, followed by a 2-hour essay exam.
CHARTERED PROPERTY CASUALTY UNDERWRITER (CPCU): A professional designation awarded by the American Institute of Property and Casualty Underwriters to persons in the property and liability insurance field who pass a series of exams in insurance, risk management, economics, finance, management, accounting, and law. Designatees must also have at least three years of experience in the insurance business or related field.
CLAIM: A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.
CLAIMS-MADE POLICY: A liability insurance policy that is triggered at the time a claim is made, rather than at the time the injury or damage occurs.
COINSURANCE: A clause contained in some property insurance policies to encourage policyholders to carry a reasonable amount of insurance. If the insured fails to maintain the amount specified in the clause (usually at least 80%), the insured is penalized and shares a higher proportion of the loss.
COMBINED RATIO: An indication of the profitability of an insurance company, calculated by adding the loss and expense ratios.
COMMERCIAL AUTO INSURANCE: Liability insurance covering injuries or property damage suffered by others in an accident caused by you or your employee while driving a covered auto. Claim Example: An employee hits a pedestrian while driving one of the business vehicles. The pedestrian requires medical treatment that results in significant medical bills.
COMMERCIAL PACKAGE POLICY: Provides a broad package of property and liability coverages which typically can be added on an ala carte basis and rated accordingly.
COMMERCIAL PROPERTY: Protects covered property from damages resulting from covered perils such as fire, theft, and natural disaster.
COMMERCIAL UMBRELLA: A policy designed to provide protection against catastrophic losses. It generally is written over various primary liability policies, such as the General Liability, Business Auto, Directors & Officers Liability, and Employers Liability coverage. Claim Example: Slip and fall coverage was exhausted on their General Liability Occurrence and/or aggregate limit, and the umbrella will kick in for the excess coverage. So if you have one claim that goes over the $1M occurrence limit, the umbrella will kick in. If you have multiple claims in the year that total is over the $2M aggregate, the umbrella will kick in.
COMMISSION: A percentage of premium paid to agents by insurance companies for the sale of policies.
COMPUTER FRAUD & WIRE TRANSFER: Insures against theft of money, securities, or property by using a computer to transfer covered property from the insured’s premises or bank to another person or place. No coverage is provided for theft of information or for computer vandalism.
CONCURRENT CAUSATION: Property loss incurred from two or more perils in which only one loss is covered but both are paid by the insurer due to simultaneous incident.
CONDITIONS: Requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.
CONDOMINIUM: A building or complex of buildings containing a number of individually owned apartments or houses. Use of land access to common facilities such as hallways, elevators, exterior areas, and amenities are executed under legal rights associated with the individual ownership.
CONTENTS: Covers nearly all items of value that aren’t considered a structure, fixture, automobile, watercraft, or aircraft. This would include items such as desks, chairs, tools, equipment, appliances, furniture, etc. It can also include mobile equipment, which includes items such as Bobcats, forklifts, and other mobile pieces of equipment that aren’t meant for use on public roads and are not required to be licensed with the Department of Motor Vehicles.
CONTRACTUAL LIABILITY: Liability coverage of an insured who has assumed the legal liability of another party by written or oral contract.
COOPERATIVE: A type of residence where the buyer owns shares in the corporation that owns the building and signs a proprietary lease, which gives them the right to live in a specific unit. The buyer does not actually own the unit. As part of their membership as a shareholder in the cooperative, they generally have access to any amenities.
COVERAGE A – LOSS TO THE UNDAMAGED PORTION OF THE BUILDING: Insurance covers property damaged by a covered cause of loss. In the event a building has been damaged by a covered cause of loss and must be demolished as required by an ordinance, this will provide coverage for the undamaged portion of the building.
COVERAGE B – DEMOLITION COST: Cost to demolish the undamaged portion of the building in the event it must be demolished due to a covered cause of loss.
COVERAGE C – INCREASED COST OF CONSTRUCTION: A part of Ordinance or Law. Provides coverage for the cost to bring the building up to code in the event of a covered cause of loss.
COVERED CAUSE OF LOSS: The basic and broad causes of loss forms are named perils forms; they provide coverage for loss from only the particular causes that are listed in the policy as covered. The special causes of loss form provides coverage for loss from any cause except those that are specifically excluded.
CYBER LIABILITY A.K.A. DATA BREACH: Most often covers an insured’s liability for a data breach in which personal information in their possession, such as Social Security or credit card numbers, is exposed or stolen by a hacker or other criminal who has gained access to either the electronic network or paper files. Claim Example: A board member has a list of social security numbers of unit owners and their computer is hacked with all of the information stolen.
DATE OF ISSUE: Date when an insurance company issues a policy.
DECLARATIONS: The front page(s) of a policy that specifies the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured.
DEDUCTIBLE: Portion of an insured loss that is required to be paid by the policyholder.
DEMOLITION COST: Cost to demolish the undamaged portion of the building in the event it must be demolished due to a covered cause of loss.
DIFFERENCE IN CONDITIONS (DIC) INSURANCE: An insurance policy or coverages that provide expanded coverage for some perils that are not covered by standard insurance policies. The difference in conditions insurance is designed to fill in gaps in insurance coverage and is most frequently used for protection from catastrophic perils such as flood and earthquake coverage.
DIRECT LOSS: Damage to covered real or personal property caused by a covered peril.
DIRECT WRITER: An insurance company that sells policies to the insured directly through salaried representatives or exclusive agents only.
DIRECTORS & OFFICERS LIABILITY: Liability coverage protecting directors or officers of a corporation from liability arising out of the performance of their professional duties on behalf of the corporation. Claim Example: (1) Unit owners filed a suit against the board of directors and property managers, claiming the BOD election was unfair. (2) Breach of Contract: The Community Association Board entertained bids by companies to waterproof the deck around their pool. The contract was worth approximately $120,000. ABC Company submitted the lowest bid and was told the work would have to be started in 3 months and completed in 2 weeks. ABC Company bought a performance bond, blocked off the necessary time, and in so doing refused to take other jobs. The board was having other work done around the pool and encountered problems. A week before ABC Company was to begin work, the board notified them they couldn’t start, and it might be another three months before they could come on the site. ABC Company sued the board for breach of contract.
DOMESTIC INSURER: An insurance company that is domiciled and licensed in the state in which it sells insurance.
EARNED PREMIUM: The portion of premium for which the policy protection or coverage has already been given during the now-expired portion of the policy term.
EARTHQUAKE: Property coverages for losses resulting from a sudden trembling or shaking of the earth, including that caused by volcanic eruption. Claim Example: Damage to the building due to a recorded earthquake.
EDP POLICIES: Coverage to protect against losses arising out of damage to or destruction of electronic data processing equipment and its software.
EFFECTIVE DATE: Date at which an insurance policy goes into force.
EMPLOYEE BENEFITS LIABILITY (EBL): A type of professional liability insurance that covers an insured in the event of a claim which may arise out of errors and/or omissions in the administration of a benefit plan, such as group health, dental, etc. Claim Example: A new employee requests to receive medical insurance through the employer. The employer failed to add the new employee to the plan. As a result, the health insurance company later denies coverage for the employee’s medical claim. The Employee Benefits Liability coverage would pay for the benefits that would have been payable under the health insurance plan but for the employer’s error. This coverage applies to a wide range of employee benefits, including health, life and disability insurance, retirement plans, and other benefits offered through plans administered by the employer.
EMPLOYEE DISHONESTY: Coverage for employee theft of money, securities, or property, written with a per loss limit, a per-employee limit, or a per position limit. Employee dishonesty coverage is one of the key coverages provided in a commercial crime policy. Claim Example: A former property manager was paying a construction company that was fraudulent and not actually performing any work.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA): A federal statute governing standards for private pension plans, including vesting requirements, funding mechanisms, and plan design.
EMPLOYERS LIABILITY: Employers’ liability provides coverage for the legal liability of employers arising out of injuries to employees. It is a portion of the Workers Compensation policy.
EMPLOYMENT PRACTICES LIABILITY COVERAGE: Liability insurance for employers providing coverage for wrongful termination, discrimination, or sexual harassment of the insured’s current or former employees. Coverage can sometimes be endorsed to cover independent contractors who file suit as well. Claim Example: Allegations of employment discrimination/harassment when a former building employee claims she was fired once management discovered she was pregnant.
ENDORSEMENT: An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.
ENVIRONMENTAL LIABILITY: Coverage for negligence or omission resulting in pollution or environmental contamination.
ERRORS AND OMISSIONS LIABILITY | PROFESSIONAL LIABILITY OTHER THAN MEDICAL: Liability coverage of a professional or quasi-professional insured to persons who have sustained a loss from omissions arising from the performance of services for others, errors in judgment, breaches of duty, or negligent or wrongful acts in business. Claim Example: Management declined coverages, a claim occurred and the building didn’t have the proper limits/coverage.
EXCESS LIABILITY: A policy issued to provide limits in excess of an underlying liability policy. The underlying liability policy can be, and often is, an umbrella liability policy. An excess liability policy is no broader than the underlying liability policy; its sole purpose is to provide additional limits of insurance.
EXPERIENCE MODIFICATION (MOD): An experience mod is a multiplier within a Workers Compensation policy applied to the premium and provides an incentive for loss prevention. It represents either a credit or debit that is applied to the premium before discounts. If a company’s loss experience is more costly on average than other company’s loss experience in that industry, the result is a debit or surcharge on premiums. If a company’s experience is less costly than the industry average, they will receive a credit or discount on their premium. Basically, the insured’s loss experience is compared to the loss experience of the industry.
EXPERIENCE RATING: Rating system within a Workers Compensation policy where each company is rated entirely on the basis of its own expected claims in the coming period, with retrospective adjustments for prior periods.
EXPOSURE: Risk of possible loss.
EXTENDED REPLACEMENT COST: Increases the Building Limit by a specified percentage in the event coverage is needed.
EXTENDED REPORTING PERIOD (ERP): a feature you can add to your claims-made professional liability insurance policy. It allows you to report claims even after your policy expires. This policy endorsement is also known as tail coverage.
EXTRA EXPENSE INSURANCE: A type of property insurance for extraordinary expenses related to business interruption such as a backup generator in case of power failure that results from a covered cause of loss. Claim Example: A carrier pays for fire protection while the sprinkler system is under repair after a covered loss.
FEDERAL FLOOD INSURANCE: Coverage for qualifying residents and businesses in flood-prone regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968.
FEMA: Federal Emergency Management Agency – An independent agency, tasked with responding to, planning for, mitigating, and recovery efforts of natural disasters.
FIDELITY A.K.A CRIME OR EMPLOYEE DISHONESTY: A bond or policy covering an employer’s loss resulting from an employee’s dishonest act (e.g., loss of cash, securities, valuables, etc.).
FIRE: Coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire.
FIRE LEGAL LIABILITY A.K.A DAMAGE TO PREMISES RENTED TO YOU: One of the limits of Liability prescribed by the standard Commercial General Liability policy. It applies to damage by fire to premises rented to the insured and to damage regardless of cause to premises (including contents) occupied by the insured for 7 days or less. Does not apply to a cooperative or condominium, only the commercial spaces that rent/lease space in the building.
FLOOD (FEMA): Either a general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties (at least 1 of which is the policyholder’s property) from:
- Overflow of inland or tidal waters
- Unusual and rapid accumulation or runoff of surface waters from any source
- A collapse or subsidence of land along the shore of a lake or a similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
FLOOD INSURANCE: Coverage protecting the insured against loss or damage to real or personal property from flood. In some instances, it may be offered as an additional peril on a property insurance policy
FOREIGN INSURER: An insurance company selling policies in a state other than the state in which they are incorporated or domiciled.
FORGERY & ALTERATION: Covers loss due to dishonesty in writing, signing, or altering checks, bank drafts, and other financial instruments.
FRONTING: An arrangement in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission. Often, the fronting insurer is licensed to do business in a state or country where the risk is located, but the reinsurer is not.
FUNCTIONAL REPLACEMENT COST: The amount it would cost to repair or replace the building using materials that are functionally equivalent to obsolete, antique, or custom methods and materials.
FUNDS TRANSFER FRAUD: Provides coverage for the loss of money and securities sustained by an insured that has been committed by a third party.
GARAGE KEEPERS LEGAL LIABILITY (GKLL): Coverage for a garage business for loss to a customer’s auto left in the insured’s care, custody or control. The policy clarifies that by stating, “while the insured is attending, servicing, repairing, parking or storing it in your garage operations.” A necessity when providing valet parking services.
GENERAL LIABILITY: A part of the general insurance system of risk financing to protect the insured from the risks of liabilities, such as legal fees and judgments in the event an insured is sued for claims that come within the coverage of the insurance policy.
GUARANTEED REPLACEMENT COST: Coverage that will pay for the entire cost of replacing or repairing the damaged or destroyed property even if it is beyond the policy limit.
GUARANTY FUND: Funding mechanism employed by states to provide funds to cover policyholder obligations of insolvent reporting entities.
HARD MARKET: A market characterized by high demand and low supply. Premiums tend to increase.
HAZARD: Circumstance which tends to increase the probability or severity of a loss.
HIRED & NON-OWNED AUTO LIABILITY: Covers bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles (vehicles owned by others, including vehicles owned by your employees). Claim Example: an employee using a personal vehicle to run business errands, such as going to the bank, gets into an accident. This would cover the damage to the other car and any injuries to its occupants, but not to the employee’s vehicle or injuries to its occupants. The employee’s personal car insurance policy would cover that.
HOLD-HARMLESS AGREEMENT: A risk transfer mechanism whereby one party assumes the liability of another party by contract.
HOMEOWNERS INSURANCE: A package policy combining real and personal property coverage with personal liability coverage. Coverage is applicable to the dwelling, appurtenant structures, unscheduled personal property, additional living expense, and Personal Liability typically.
HO4: Tenants policy also known as a renters policy. Provides coverage for personal property, loss of use, liability, and medical payments. Renter’s policies do not provide coverage for dwelling or improvements or betterments as an HO6 condo policy would.
HO6: The condominium unit owner’s insurance policy. It provides coverage for either a condominium or co-op and differs from a typical homeowners policy in that it does not provide coverage for the actual dwelling, but does provide coverage for what the owner is responsible for within the unit including improvements & betterments.
IMPROVEMENTS OR BETTERMENTS COVERAGE A.K.A. ADDITIONS & ALTERATIONS: A coverage within the HO-6 Condominium Unitowners Homeowner’s policy. It provides coverage for damage to what an owner, whether in a co-op or condominium, is responsible for within the unit.
INCREASED COST OF CONSTRUCTION: A part of Ordinance or Law. Provides coverage for the cost to bring the building up to code in the event of a covered cause of loss.
INCURRED BUT NOT REPORTED (IBNR): Claims that have occurred but the insurer has not been notified of them at the reporting date. Estimates are established to book these claims.
INCURRED LOSSES: Sustained losses, paid or not, during a specified time period.
INDEPENDENT ADJUSTER: Freelance contractor paid a fee for adjusting losses on behalf of companies.
INDEPENDENT AGENT: A representative of multiple insurance companies who sells and services policies for records that they own and operate under the American Agency System.
INDEPENDENT CONTRACTOR: An individual who is not employed for a company but instead works for themselves providing goods or services to clients for a fee.
INLAND MARINE: Coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off-road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as property with antique or collector’s value, etc.
INSURABLE INTEREST: A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damage, loss, or destruction to it.
INSURANCE: An economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.
INSURANCE TO VALUE: Amount of insurance purchased vs. the actual replacement cost of the insured property expressed as a ratio.
INSURED: Party(ies) covered by an insurance policy.
INSURER: An insurer or reinsurer who is authorized to write property and/or casualty insurance under the laws of any state.
KIDNAP/RANSOM INSURANCE: Coverage for ransom or extortion costs and related expenses.
LAPSE: The time between policies when there is no coverage for the insured, due to non-payment of the required renewal premium.
LEAD PAINT LIABILITY: Coverage for third-party suits lodged for bodily injury due to lead paint. Does not provide coverage for remediation. Claim Example: The insured, a landlord of residential rental property, was sued by his tenant after the tenant’s daughter sustained permanent personal injury from the ingestion of lead-based paint that was present in the rental property.
LIMITS: Maximum value to be derived from a policy. Claim Example of Liability Limit: Someone slips and falls on a building’s cracked sidewalk and breaks their arm.
LIQUOR LIABILITY: Coverage for the liability of an entity involved in the retail or wholesale sales of alcoholic beverages, or the serving of alcoholic beverages, to persons who have incurred bodily injury or property damage arising from an intoxicated person.
LLOYD’S OF LONDON: Association offering membership in various syndicates of wealthy individuals organized for the purpose of writing insurance for a particular hazard.
LOSS: Physical damage to property or bodily injury, including loss of use or loss of income.
LOSS ASSESSMENT: Loss assessment is coverage within the homeowner’s policy for a co-op or condominium unit owner. In the event the community association does not maintain adequate coverage for a covered cause of loss, such as a hurricane, the association may assess the owners to make up for the deficit. If this happens, Loss Assessment will provide the owner with coverage for their share of the assessment, up to the limit maintained and as long as the damage was from a covered cause of loss under the homeowner’s policy.
LOSS FREQUENCY: Incidence of claims on a policy during a premium period.
LOSS PAYEE: A person or entity that is entitled to all or part of the insurance proceeds in connection with the covered property in which it has an interest. Often those asking to be named as loss payees have leased some type of equipment to the insured—a photocopy machine, for example. A loss payee is also common in a Personal Auto policy in which the automobile is financed. The lending institution would require the insured to list them as the Loss Payee.
LOSS RATIO: The percentage of incurred losses to earned premiums.
LOSS RECOMMENDATION: A method used to reduce the possibility of a loss/ claim from occurring and to reduce the severity of a loss/ claim of those that do occur. The carrier will provide a list of loss recommendations, typically after an inspection, to reduce the risk and severity of a claim occurring.
LOSS RUN: A history of claims filed against the insurance policy. The more frequent and severe the losses, the harder the risk becomes to insure.
LOSS TO THE UNDAMAGED PORTION: A part of Ordinance or Law. Covers the value of the undamaged portion of the building in the event the building needs to be demolished.
LOSSES INCURRED BUT NOT REPORTED (IBNR): An estimated amount set aside by the insurance company to pay claims that may have occurred, but for some reason have not yet been reported to the insurance company.
MANDATED BENEFITS: Insurance required by state or federal law
MARKET VALUE: Fair value or the price that could be derived from the current sale of an asset.
MEDICAL PAYMENTS COVERAGE: Coverage pays medical expenses resulting from bodily injury caused by an accident on premises owned or rented by the insured, locations next to such property, or when caused by the insured’s operations. These payments are made without regard to the liability of the insured. Claim Example: Someone trips and falls and needs first aid or an ambulance.
MINIMUM EARNED PREMIUM: The minimum earned premium is the smallest amount of money an insurance company is willing to accept for writing a business insurance policy. The minimum earned premium becomes an issue mainly when the named insured decides to cancel a policy before its expiration date.
MOLD COVERAGE: Coverage for mold remediation may be covered under the Property policy, depending on circumstances and defense, and judgments from a mold-related suit may be covered under the General Liability, depending on circumstances. Claim Example: (1) General Liability- A unit owner sues the building claiming severe respiratory illnesses sustained due to the building not remediating mold in their unit. A plaintiff suing for long-term health problems and the death of several animals. (2) Property- The building sustained a covered water damage loss, and while they were making repairs, they noticed mold had formed. The insured mitigated the water damage which Under their mold coverage, they were able to have the testing and remediation covered.
MORAL HAZARD: Personality characteristics that increase the probability of losses. For example not taking proper care to protect insured property because the insured knows the insurance company will replace it if it is damaged or stolen.
MORALE HAZARD: Negligence or disregard on the part of the insured which could lead to probable loss.
MORTGAGE GUARANTY: Insurance that indemnifies a lender for loss upon foreclosure if a borrower fails to meet required mortgage payments.
MUTUAL INSURANCE COMPANY: A privately held insurer owned by its policyholders, operated as a non-profit that may or may not be incorporated.
NAMED INSURED: Any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy, as distinguished from others that, although unnamed, fall within the policy definition of an “insured.”
NAMED PERIL COVERAGE: Insurance for losses explicitly defined in the policy contract. All perils not named are excluded.
NEGLIGENCE: Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.
NET PREMIUMS EARNED: Premiums on a policy that will not have to be returned to the policyholder if the policy is canceled.
NETWORK EXTORTION: Provides coverage for the reimbursement of extortion expenses and ransom payments incurred as a direct result of a cyber extortion threat.
NON-ADMITTED INSURER: Insurance company not licensed to do business within a given state.
OCCURRENCE: An accident, including continuous or repeated exposure, which results during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
ORDINANCE OR LAW: Consists of three parts, Coverage A: Loss to the Undamaged Portion – Covers the value of the undamaged portion of building in the event the building needs to be demolished. Coverage B: Demolition Cost – Cost to demolish the undamaged portion of building and Coverage C: Increased Cost of Construction – Cost to bring the building up to code in the event of a claim. Claim Example: There is damage to 50% of the building from a fire. The city requires the entire building to be torn down because they do not feel it is structurally sound. Without Building Ordinance coverage, your insurance will only cover the damaged portion of the building. Coverage A will cover the cost of the undamaged portion of the building in this instance; Coverage B covers the cost to demolish the undamaged portion of the building, and Coverage C will provide funds for the increased cost of construction required to meet current building ordinances and codes when rebuilding. These items may include updates like fire sprinklers, emergency lights, and handicap accessibility that were not present at the time of the loss.
PACKAGE POLICY: Two or more distinct policies combined into a single contract.
PERIL A.K.A CAUSE OF LOSS: The cause of property damage or personal injury, origin of desire for insurance.
PERSONAL ARTICLES FLOATER: Is used to insure valuable personal property that often requires more coverage than what is provided by an insured’s homeowner policy, due to various exclusions and limitations on homeowner coverage. A personal articles floater is sometimes called an “inland marine policy” or a “valuable articles policy.” Coverage for this type of policy is often worldwide and includes many more causes of loss than a standard policy, such as mysterious disappearance, accidental breakage, and theft. The most common items to insure include jewelry, watches, furs, coins & stamps.
PERSONAL INJURY LIABILITY: Liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated. Claim Example: A community association posts a list of delinquent accounts on the bulletin board against the community manager’s advice. It covers slander, libel, and defamation of character.
PERSONAL INJURY PROTECTION COVERAGE (PIP): Automobile coverage available in states that have enacted no-fault laws or other auto reparation reform laws for treatment of injuries to the insured and passengers of the insured.
PERSONAL LIABILITY: Provides coverage for bodily injury and property damage sustained by others for which you or your family members are legally responsible.
PERSONAL PROPERTY: Possessions other than real estate or buildings. Personal property, such as clothing and furniture, is movable and includes tangible and intangible items.
PERSONAL UMBRELLA: A policy designed to provide protection against catastrophic losses. It generally is written over a Homeowner’s policy, Personal Auto policy, and a Watercraft policy.
PET INSURANCE PLANS: Veterinary care plan insurance policy providing care for a pet animal (e.g., dog or cat) of the insured owner in the event of its illness or accident.
POLICY: A written contract ratifying the legality of an insurance agreement.
POLICY PERIOD: The time period during which insurance coverage is in effect.
POLLUTION: Environmental contamination.
POOL: An association organized for the purpose of absorbing losses through a risk-sharing mechanism thereby limiting individual exposures.
PREMIUM: Money charged for the insurance coverage reflecting expectation of loss.
PREMISES POLLUTION LIABILITY: Designed to cover claims arising from pollution released at, on, or emanating from a specific scheduled location.
PRIMARY INSURANCE: Coverage that takes precedence when more than one policy covers the same loss.
PRODUCER: An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
PRODUCTS & COMPLETED OPERATIONS LIABILITY: Insurance coverage protecting the manufacturer, distributor, seller, or lessor of a product against legal liability resulting from a defective condition causing bodily injury, or damage, to any individual or entity, associated with the use of the product. Also covers the liability of contractors, plumbers, electricians, repair shops, and similar firms to persons who have incurred bodily injury or property damage from defective work or operations completed or abandoned by or for the insured, away from the insured’s premises.
PROPERTY INSURANCE: Coverage protecting the insured against loss or damage to real or personal property from a covered cause of loss.
PROPERTY DAMAGE LIABILITY: Covers your legal liability if you’re at fault in an accident that involves injury to others’ property.
PROVISIONS: Contingencies outlined in an insurance policy.
PROXIMATE CAUSE: Event covered under insured’s policy agreement.
PUBLIC ADJUSTER: Independent claims adjuster representing policyholders instead of insurance companies.
PURE RISK: Circumstance including possibility of loss or no loss but no possibility of gain.
RATE: Value of insured losses expressed as a cost per unit of insurance.
REBATE: A refund of part or all of a premium payment.
RECOVERABLE DEPRECIATION A.K.A. HOLDBACK: Generally is the difference between Replacement Cost and Actual Cash Value. If the coverage is written on a Replacement Cost basis, the holdback or recoverable depreciation will be paid when the insured has completed repairing the damage to the property and shows proof in the form of paid invoices and canceled checks, to demonstrate that the cost to repair met or exceeded the total Replacement Cost amount of the claim.
REINSURANCE: A transaction between a primary insurer and another licensed (re)insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer
REINSURER: Company assuming reinsurance risk.
RENTERS INSURANCE: A form of property insurance that provides coverage for a policy holder’s belongings and liability within a rental property.
REPLACEMENT COST VALUE (RCV): The cost of replacing property without a reduction for depreciation due to normal wear and tear.
RESERVATION OF RIGHTS: A reservation of rights letter from your insurer is a notice that even though the company is proceeding to handle your claim, certain losses may not be covered by the terms of your insurance policy.
RESERVE: The amount that insurers set aside to cover claims incurred but not yet paid.
RETENTION (Umbrella): Becomes a deductible in the event the underlying policy is not responding and the umbrella drops down and becomes the primary coverage.
RISK RETENTION GROUP: Group-owned insurer organized for the purpose of assuming and spreading the liability risks to its members.
SEEPAGE DEDUCTIBLE: The deductible is what the insured is responsible for if loss or damage caused to the interior of the building without first causing damage to the exterior or roof.
SELF-INSURANCE: Type of insurance often used for high-frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.
SELF-INSURED RETENTION: In a Liability policy, a self-insured retention (SIR) is defined as a dollar amount specified that must be paid by the insured before the insurance policy will respond to a loss. In an Umbrella policy, it works the same way, but it acts more like a deductible when the underlying policy isn’t providing coverage and the umbrella drops down and provides coverage.
SHORT RATE PENALTY: A short rate cancellation is when a policyholder cancels an insurance policy before the expiration date and they are not entitled to receive a refund proportionate to the period of coverage left in the policy term. It serves as a disincentive to canceling policies midterm.
SHORT TERM DISABILITY INSURANCE: Pays a percentage of an employee’s salary if they become temporarily disabled due to sickness or injury not related to their job. Required in most states if there are any employees on the payroll.
SOFT MARKET: A buyer’s market characterized by an abundant supply of insurance driving premiums down.
SPECIAL FORM A.K.A OPEN PERIL: Covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract. If it’s not listed under exclusions, it’s covered.
STAND ALONE POLICY: A stand-alone D&O policy typically provides broader coverage than a D&O endorsement added to the General Liability policy.
STATE OF DOMICILE: The state where a company’s home office is located.
STOCK INSURANCE COMPANY: Business owned by stockholders.
SUBROGATION: Situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.
SUBROGATION CLAUSE: Section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.
SURETY BOND: A three-party agreement whereby a guarantor (insurer) assumes an obligation or responsibility to pay a second party (obligee) should the principal debtor (obligor) become in default.
SURPLUS LINE: Specialized property or liability coverage available via non-admitted insurers where coverage is not available through an admitted insurer, licensed to sell that particular coverage in the state.
SYSTEMS BREAKDOWN COVERAGE A.K.A. BOILER & MACHINERY OR EQUIPMENT BREAKDOWN: Protects against breakdowns caused by power surges, motor burnout, boiler malfunction, and operator error. It covers all sorts of equipment, including new technology. It provides coverage for mechanical and electrical equipment, computers and communication equipment, air conditioning and refrigeration systems, boilers, and pressure equipment. Coverage can pay for 1) The cost to repair or replace the damaged equipment, 2) Costs associated with the time and labor to repair or replace the equipment, 3) Business income losses when a covered breakdown causes a partial or total business interruption, 4) Other expenses incurred to limit loss or speed restoration, 5) The cost to replace spoiled stock or materials. Claim Example: A boiler leaks due to an unknown cause and repairs are covered to get the boiler back up and running.
TENANTS DISCRIMINATION LIABILITY: Provides property owners and managers with coverage for defense costs and loss incurred in administrative charges and lawsuits brought by current, prospective, or former tenants alleging discrimination.
TERRORISM RISK INSURANCE ACT (TRIA): A United States federal law signed into law by President George W. Bush on November 26, 2002. The Act created a federal “backstop” for insurance claims related to acts of terrorism and in return, insurers must offer Terrorism Insurance.
THEFT, DISAPPEARANCE & DESTRUCTION: Insures against loss by theft, disappearance, or destruction of the insured’s money and securities inside the insured’s premises (or insured’s bank’s premises) as well as outside the insured’s premises while in the custody of a messenger.
THIRD PARTY: A person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured.
TREATY: A reinsurance agreement between the ceding company and reinsurer.
UMBRELLA: See Commercial Umbrella or Personal Umbrella.
UNDERINSURED MOTORIST COVERAGE: Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. It allows an insured to collect the difference between the losses incurred and the liability covered by the motorist at fault up to the limit maintained in their own policy.
UNDERWRITER: Person who identifies, examines, and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.
UNDERWRITING: The process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted, and determines the appropriate rate for coverage provided.
UNEARNED PREMIUM: Amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.
UNINSURED MOTORIST COVERAGE: In the event of a qualifying accident, the insurance company pays the difference between what the uninsured driver can pay and what the injured driver (insured) would be entitled to as if the uninsured motorist had proper insurance. May also apply when an individual flees the scene of an accident without leaving sufficient information to identify him or herself, the individual is considered uninsured for the purposes of an uninsured motorist provision and the insured can collect under their own policy up to the limit maintained.
WAIVER OF SUBROGATION: A waiver of subrogation is a special type of endorsement on a property-casualty insurance policy. It prohibits the insurer from attempting to seek restitution from a third party who caused a loss to the insured
WARRANTY: In contract law, a warranty has various meanings but for insurance purposes, it generally means a guarantee or promise which provides assurance by one party to the other party that specific facts or conditions are true or will happen.
WATER DAMAGE DEDUCTIBLE: The deductible is what the insured is responsible for if loss or damage caused by or resulting from covered water damage occurs.
WATER DAMAGE LEGAL LIABILITY: Water damage legal liability insurance refers to a type of policy that provides financial protection to a person or business that unintentionally causes water damage to the property of another. To be covered, the water damage usually has to be caused by a sudden event or accident. Claim Example: A contractor was performing work and hit a sprinkler behind the wall causing water damage to the source unit and several surrounding units.
WIND/HAIL DEDUCTIBLE: A separate, higher deductible provision that applies to loss caused by wind or hail. Often, the deductible is expressed as a percentage of the value of the property or, in a homeowners policy, as a percentage of the dwelling limit, rather than as a flat dollar amount. Claim Example: (1) High winds caused damage to the roofing shingles, which ultimately caused water intrusion and water damage to several units and common areas. (2) Hail storm caused exterior damage to the roof and windows.
WORKERS’ COMPENSATION: Insurance that covers an employer’s liability for injuries, disability, or death to persons in their employment, without regard to fault, as prescribed by state or federal workers’ compensation laws and other statutes. Claim Example: A super falls while changing a light bulb and falls off their ladder breaking their arm.