Accident: One time event which is unintended, unforeseen and unexpected. It is something that is definite in time and place. Accidental Death and Dismemberment Insurance: A form of insurance providing benefits in the accidental death, or the accidental loss of sight or members (such as an arm or a leg). Accidental Death Benefit: A lump sum payment for loss of life due to an accident that was the direct cause of death. The cause of the mishap must be accidental for a benefit to be payable under the policy. Act of God: An event beyond human origin or control. Lightning, windstorms, and earthquakes are examples. The damage from which would not be the responsibility of a bailee, although the bailee might be responsible for many other calamities. Acts of God are excluded by the usual bill of landing as well as by some insurance policies, unless specifically included. Actual Cash Value: The basis of loss settlement in property insurance policies which takes into consideration such factors as replacement value less depreciation, market value, rental value, the use of the building, the area in which it is located, obsolescence, assessed validation and any other factor which would have an effect upon the value. A working rule-of-thumb definition, however, is "replacement cost new at the time of loss, less depreciation." See Replacement Cost Value. Actuary: A social mathematician who uses mathematical skills to define, analyze and solve complex business and social problems involving insurance and employee benefit programs. Additional Living Expense Insurance: Insurance for the extra amount it costs and insured to live until repairs are made to the insured's dwelling Additional Vehicle: A vehicle acquired during the policy period in addition to those already listed in the Declarations Adjuster: One who determines the amount of loss suffered. A "company" or "independent" adjuster represents the company. A "public" adjuster represents the policyholder. Admitted Company: A foreign or alien insurance company which has been licensed by the insurance department of the state in question, and thereby is authorized to conduct business within that state to the extent licensed. Also know as an authorized company. Adverse Selection: The insuring of one or more risks with a higher chance of loss than that contemplated by the applicable insurance rate. The selection of such risks is adverse because the rate is inadequate. Age Change: The halfway point between birthdays when the age of the applicant changes to the next higher age. In some insurance companies, the age is based upon the applicant's ate at his nearest birthday. In others, it is based on the age of his last birthday. Agent: One who has authority to act for another. The insurance language, an agent is the person who sells insurance by contacting the policyholder, and by contract and by law is endowed with many of the powers of the company itself. Aggregate Limit: In a policy such an aggregate limit, the maximum amount the insurer will pay during the policy period, irrespective of the policy's limit of liability. Agreed Amount Clause: A condition of a policy stating that he insurer agrees to waive the coinsurance requirement in consideration of the insured's maintaining insurance equal to the amount agreed upon at the inception of the policy. All-Risk Policy: A policy which covers loss caused by any peril which is not excluded, as contrasted to "named peril" policies which protect against certain perils named in the policies. Annuitant: A person during whose life an annuity is payable. Generally, an annuitant is the person who receives the monthly income payment. Annuity: A contract providing periodic income payments for a fixed period of time or during the lifetime of an annuitant. In may be defined as the systematic liquidation of an estate. Annuity, Cash Refund: A life annuity contract which provides that upon the death of the annuitant, the beneficiary (or his estate) will receive a lump sum payment which represents the difference between the amount the annuitant paid to the insurance company and the total income payments received by the annuitant. Annuity, Certain: Payable for a minimum specified period and continuing thereafter throughout the lice time of the annuitant. Annuity, Deferred: Payments commence more than one year after the payment of the firs (or single) premium to the insurance company, usually at a selected retirement age. Annuity, Installment Refund: Similar to a cash refund annuity, except that money is refunded in installment payment and the insurance company makes payments to the designated beneficiary until the total of the payments made to the annuitant and the beneficiary equals the consideration paid. Annuity Joint and Last Survivor: An annuity issued on the lives of two or more persons, which is payable as long as one of them survives. Application: A form filled out and signed by a prospective insured which becomes part of the policy. Appraisal Clause: The clause in a policy that sets forth the conditions under which a disputed loss is decided by appraisers. Appraiser: 1) A person who determines the value of property or 2) A party who determines the amount of a disputed loss. Assessment: The charge levied by an insurer writing an assessable policy (as sold by some mutual insurers), in addition to the policy premium, in the event the insurer becomes unable to pay its total losses. Assignee: A person, firm, of corporation to whom the rights under contract are assigned in their entirety or in part. Assignment: Transferring property rights to another. Insurance policies may thus be assigned or transferred to another, but usually this requires the consent of the insurer. Assumed Liability: Contractual liability, which arises from agreement between people as opposed to liability which, arises from common or statute law. Assured: The person or party protected by a policy of insurance. Same as insured. Attained Age: An age which a person or insured has attained on a given date. For life insurance purposes, the age is based on either the nearest birthday or the last birthday, depending on the practices of the insurance company involved. Automatic Premium Load (Automatic Premium Advance): A provision in a life insurance policy which states that if an insured fails to pay a premium by the end of the grace period, the amount of the premium due will be loaned to the insured automatically. However, the loan value of the policy must be sufficient to cover the loan plus interest. Generally, the insured must request that the clause be made a part of the policy at the time of application. Aviation Clause: A clause that limits the liability of the insurance company if certain types of aviation accidents cause the death of an insured. B Bailee: One who has custody of the property of another to be held and returned to the owner in good condition. The owner who delivers the property is called the bailor; the one who receives it is the bailee. Bailor: A person entrusting goods to another. Barratry: Willful and illegal sinking, casting away, or damaging a ship at sea or its cargo. Beneficiary, Contingent (Secondary): A parson who is entitled to benefits only after the death of a primary beneficiary. Beneficiary, Irrevocable: The insured may not change the designated beneficiary without the beneficiary's consent. Beneficiary, Primary: A person who is entitled primarily to benefits upon the death of an insured. Beneficiary, Revocable: The designated beneficiary may be changed at the insured request without the consent of the beneficiary. Beneficiary, Tertiary: The person who entitled to the policy benefits if the primary and contingent beneficiaries predecease the insured. Bid Bond: A bond intended to guarantee that the bidder on a construction, supply or service contract would enter into the contract if successful as a bidder. Binder: An oral or written agreement to insure which serves as evidence of coverage prior to the issuance of a policy. Binding Authority: The right on e party (usually an agent) has to represent another (usually the insurer) in effecting or creating an insurance contract. Binding Receipt: Insurance becomes effective on the date of the receipt and continues for a specified period of time until the company disapproves the application. Blanket Insurance: A single amount of insurance covering several items (e.g. one amount of insurance to cover two buildings, or one building and its contents) Blanket Position Bond: A fidelity bond, which insures an employer against loss from dishonest acts by employees. Bodily Injury: Injury, sickness, or disease sustained by a person, including death at any time resulting therefrom. Bond, Fidelity: An insurance policy that reimburses an employer for employee theft, embezzlement, or dishonesty. May be written to cover specific employees or all employees. Bond, Surety: A written agreement wherein on part, called the surety, obligates itself to a second party, called the obligee or beneficiary, to answer for the default of a third party, call the principal. Broker: A licensed, legal representative of the insured who negotiates with underwriters on behalf of the insured. Nevertheless, the broker receives a commission from the insurer (underwriter). Builders Risk: A special form dealing with the unique loss exposure of property under construction. Burglary: Theft by forcible and illegal entry, evidenced by visible signs made by tools, explosives, electricity, or chemicals. Business: A trade, profession or occupation. Business Use: The use of a vehicle for the purposes of the business or occupation. By Order Of Civil Authority: A directive of city officials or other civil authority that a building may be destroyed by the fire department to present the spread of conflagration. C Cancellation: The termination of a contract before its normal ending. Captive Agent: An agent who, by contract, represents only one company and its affiliate. Sometimes called "exclusive or controlled agent". Cargo: Goods being transported by rail, plane, truck, ship, or other conveyance, excluding the equipment needed to operate the conveyor. Cash Surrender Value: The amount (stated in the policy) which is available in cash upon the surrender of a policy for cancellation before or after the policy matures (as in death claim or otherwise). This is one of the three non-forfeiture options. Cede: To pass on to another insurer (the reinsurer) all or part of the insurance written by an insurer (the ceding insurer) with the object of reducing the possible liability of the latter. Certificate of Insurance: A document containing information concerning the master policy of a group indicating that the individual is covered. Civil Commotion: A disturbance among, or a popular uprising of, a large number of people. Claim: An amount requested of an insurer, by a policyholder or a claimant, for an insured loss. Claims-Made: A liability insurance policy version covering losses from claims asserted against the insured during the policy period. Coinsurance Clause: In property insurance, a clause require in the insured to maintain insurance at least equal to stipulated percentage of value in order to collect partial losses in full. Collision: The impact of a vehicle with another object or vehicle, or the upset of a vehicle. Collision Coverage: Covers damage to a covered auto caused by collision with another object or vehicle. Collision Insurance: Coverage for the loss resulting from the striking of another object by a moving vehicle. Commissions: Payments made by the insurance company to the agent for the sale and servicing of a policy. Commissions are calculated as a specific percentage of the premium paid and the percentage determined in accordance with the contract between the agent and his insurance company. Common Disaster Clause: This clause defines the method of the payment of the proceeds of the policy by the insurance company if the insured and the named beneficiary die simultaneously in a common disaster. It protects the contingent beneficiary since it would consider the primary beneficiary predeceased the insured. Comparative Negligence: Under comparative negligence, the damages collectible in relation to anther person are diminished in proportion to one's degree of negligence. Comprehensive Automobile Coverage: "All-Risk" Physical damage protection for automobiles, except for loss by collision or upset (which may be added). Concealment: In insurance, a failure to disclose a material fact, which may void an insurance policy. Condition: Something established or agreed upon to be necessary to make a policy of insurance effective. Conditional Receipt: A receipt given for the payment of the initial premium (accompanying the application) which makes coverage effective under the contract if the risk is approved as applied for, subject to the other conditions set forth in the receipt. Consideration: One of the elements of a valid contract. The premium and the statements made by the prospective insured in the application are construed as the insurer's consideration. The insurance company's consideration is its promise to pay a valid claim. Contract Bond: In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond. Contributory Negligence: A common law defense in which the plaintiff must be entirely free from fault in order to recover from a negligent defendant. Contributory Plan: A term applied to employees benefit plans (such as group insurance or group annuities) under which both the employees and the employer contributes. Conversion Privilege: The right granted to the insured to change his coverage from a group policy to an individual policy. If a member of a group resigns therefrom, his is given an opportunity to secure an individual policy within a specified period thereafter regardless of whether or not he is in good health at that time. This term is also applied to the right of an insured to convert from a convertible term policy to a permanent form of insurance. Coverage for Damage to Your Covered Auto (Physical Damage Coverage): Insures against damage to an insured auto caused by collision and other than collision losses. Coverage Territory: Geographic region where coverage is available under the Personal Auto Policy. Includes the United States and its territories and possessions, Canada and Puerto Rico. Coverage is also provided if the auto is damaged while being transported between these ports. Credit Life Insurance: Life insurance designed to pay the balance of a loan (usually payable in installments) if the insured dies before the loan has been paid in full. Generally, a bank department store, or a finance company handles credit life insurance. Usually this form of insurance is written on a group basis, but it may also be written on an individual basis. D Death Benefit: The amount that is paid to a beneficiary as the result of the death of an insured. Death Claim: Proof of the insured's death and the beneficiary's application that are filed with the insurance company in a request for payment under the policy. Declarations: Section of the Personal Auto Policy that shows who is insured, what property is covered, when and where coverage is effective, and how much coverage applies. Deductible: In a policy providing a deductible clause, the amount which must first be subtracted from the total damage incurred before determining the insurance company's liability. Of several types used, the straight deductible establishes the insurer's liability above the deductible but not below it; the franchise deductible establishes the insurer's liability for the entire amount of damage once the deductible amount is exceeded in a loss; and the disappearing deductible establishes the insurer's liability for an increasing proportion of the loss, as the total damage rises above the deductible, until the deductible finally "disappears". The insurer is liable for the entire amount. The deductible may be in the form of an amount of dollars, a percent of the loss, a percent of the value of the insured property, or a period of time, as in health insurance. Depreciation: The reduction in value of tangible property caused by physical deterioration, obsolescence, or wear and tear. Directors & Officers: Coverage for directors and officers. Direct Writer: A company which sells insurance to the public either through employees licensed as agents or through licensed agents, compensated on a commission basis, who represent only one company; but not through independent agents representing more than one company. Disability Benefit: A feature added to some life insurance policies which provides for the waiver of premiums upon the furnishing of proof that in insured has become totally and permanently disabled and/or for the payment of monthly income benefits to the insured. Dividend: A refund of part of the premium under a participating policy of a share of policyholders surplus funds apportioned for distribution. They are derived from savings in mortality and expenses and interest earned in excess of the assumed rate used in the calculation of the premium in the policy reserves. Dividend Options: The insured is given the option to apply dividends as follows: 1) He may receive the dividend in cash. 2) Apply the dividend toward the payment of any premium due on the policy. 3) Apply the dividend toward the purchase of paid-up additional insurance. 4) Leave the dividend with the insurance company to accumulate an interest. Domestic Company: An insurance company incorporated or organized under state law is a domestic insurer in that particular state. Double Indemnity: A clause providing payment of twice the face amount of the policy if loss of life is due to an accident. Dwelling: A house in which people live, as distinguished from a store, a factory, or any other commercial type building. E Effective Date: The day upon which a policy first becomes eligible to pay covered losses. Endorsement: A document with language attached to and becoming part of a basic policy for the purpose of amplifying or modifying it, either at its inception or during its term. Endowment Insurance: A policy that (after a specified number of years) pays a stated amount to the insured. If the insured dies during the endowment period, the face amount of the policy is paid to the designated beneficiary. An endowment pays at the earlier of death or a specified period. Evidence of Insurability: Any statement or proof of a person's physical condition that may affect acceptance for insurance. Exceptions: Provisions in a policy that eliminate coverage for specified causes of death and/or disability). Also know as exclusions. Excess Insurance: An amount of protection that bears all or a portion of a loss after the loss exceeds an agreed amount. Exclusion: 1) That which is not covered by the insurance as stated in the policy 2) A clause in an insurance policy which specified that which is excluded from the policy's coverage. Exclusive Agent: An agent who, by contract, represents only one company and its affiliates. Sometimes called a "captive agent". Experience Rating (Group Insurance): The premium is computed on the basis of past losses and expenses incurred by the insurance company in the settlement of claims and other expenses involving a particular group of risk. Extended Coverage Insurance: Protection against loss or damage caused by windstorm, hail, smoke, explosion, riot, civil commotion, vehicles, and aircraft. Extended Term Insurance: A non-forfeiture option, under which the face amount of the policy is continued in force for a specified additional period of time after default in the payment of a premium. F Face Amount: The amount of insurance stated on the face of the policy that will be paid upon the death of the insured (or in some cases at the maturity of the policy). It does not include any amount that has been added through dividend additions or additional insurance payable in the event of accidental death. Facility of Payment Clause: A provision in a policy which permits the insurance company to pay insurance proceeds to persons other than the insured, the designated beneficiary, or the estate of the insured. Fair Plan: A program to provide "Fair Access to Insurance Requirements" for property owners who experience difficulty in buying insurance on property located in blighted or deteriorating urban areas. Family Income Benefits: Under this form of life insurance, on the death of the insured, a monthly income is paid to the beneficiary (ies) tot he end of the family income period stipulated in the policy in addition to the lump sum payment (face amount). For example, it could run for a period of 10 years starting with the inception date of the policy, or it could run for 15 years, 20 years, or to age 65. Usually m it is a decreasing term insurance provision that is combined with whole life insurance. If the insured survives the family income period, the family incomplete protection ceases. The policy reverts to the face amount (usually, payable in a lump sum upon the death of the insured). Family Member: A person related to the named insured or his or her spouse by blood, marriage or adoption who lives in the named insured's household. Familt Maintenance Policy: This type of policy combines ordinary life insurance and level term insurance. I t affords the payment of a monthly income during a stated period of 10,15,or 20 years or to age 65 as pre-selected by the insured. The monthly income is payable from the date of death to the end of the pre-selected period. The payment of the face amount of the policy is payable at the end of such pre-selected period. Farm Owners - Ranch Owners (FO-RO): A package policy for farming and ranching risks which can be described as homeowners policy adapted for farm and ranch properties. Basically the policy provided property and liability insurance to which may be added appropriate additional coverage such as animal collision, employers liability, custom farming, etc. Federal Crime Insurance Program: Administered by the Federal Insurance Administration to provide limited burglary and robbery coverage for property owners who experience difficulty in buying insurance on property located in blighted or deteriorating urban areas. Fidelity Bond: An insurance policy that reimburses an employer for employee theft, embezzlement, or dishonesty. May be written to cover specific employees or all employees. Fiduciary: A person who occupies a position of trust, especially one who manages the affairs of another. For example, the guardian of a minor is a fiduciary. Financial Responsibility Laws: State laws that require owners or operators of autos to provide evidence that they have funds to pay for automobile losses for which they might become liable. Fire: Combustion manifested in light, flame and heat for useful purposes (friendly fire) or destruction purposes (hostile fire). Insurance covers loss from only the latter. Floater: A policy that covers property at many locations, even worldwide and in the course of transit. Flood: Overflow of water from its natural boundaries. More specifically defined by the National Flood Act of 19668 as "a general and temporary condition of partial or complete inundation of normally dry land areas from: 1) The overflow of inland or tidal waters. 2) The unusual and rapid accumulation or runoff of surface waters from any source. Foreign Company: In insurance, a company doing (authorized) business in one state but incorporated in another. Form: A document providing the specifics of the insurance issued, either separate unto itself or attached to other descriptive language. Fortuitous Cause: An accidental and unexpected cause of loss. A happening by chance. Fraternal Insurance: A cooperative type of insurance provided by a social organization for its members (e.g., life insurance offered by the "Knights of Columbus"). Free of Particular Average (EPA): A clause which exempts the company insuring cargo from partial losses, usually limited to apply only if the amount be less than an agreed sum, or if some other described condition exists. G Garage Policy: Protects garage or service station operators from claims alleging bodily injury or property damage caused by the operator's negligence in business operations and the use of automobiles. General Average: In ocean marine insurance, a loss that is common to all interests (i.e., the hull owners, the cargo owners, and receivers of the freight and charges, etc.), that may arise due to a peril to the entire venture, that requires a sacrifice or expenditure for the benefit of all. Grace Period: A specified period after a premium payment is due during which the protection of the policy continues even thought the payment for the renewal premium has not yet been received. Group Certificate: Certificate given to employees participating in a group insurance plan which sets for the protection to which they are entitled. Group Insurance Policy: A policy protecting a group of persons, usually employees of a firm generally called a "master policy". H Hazard: A condition that may lead to a PERIL, thus creating a loss (e.g., oily rags leading to a fire). Hold Harmless Agreement: A contractual arrangement in which one party agrees to assume certain liability which otherwise would be borne by the other party. Homeowners Policy: A "Package" policy for dwelling and contents risks combining fire and allied line coverage with comprehensive personal liability and theft insurance for homeowners and tenants. Hull: The ship itself as distinguished from its cargo. I Implied Warranty: An indirect expression or inference, not in writing, by the policyholder that certain conditions exist or will be met (e.g., that a building is not on fire when insured, or that a vessel is seaworthy). Improvements and Betterments: Additions made to real estate enhancing its value and amounting to more than mere repairs or replacement of waste. When made by a tenant, such additions are normally included in the tenant's own property insurance. Inchmaree: A clause used in ocean marine policies to identify additional named perils beyond the basic marine perils. Incontestable Clause: A clause that makes the policy indisputable (except for non-payment of premium and the operation of the war clause exclusion) regarding the statements made by the insured in the application after a specified period of time has elapsed (usually one, two, or three years). Increase in Hazard: The standard fire insurance policy is suspended from liability while the hazard in a risk has been increased beyond what was contemplated at the time the policy was written. Indemnify: To pay for loss suffered. Independent Agent: A property-liability insurance producer who sells insurance as an independent contractor while representing one or more insurers of that agent's choosing on a commission basis, owning the expiration records of customers served. Indirect Damage: Loss resulting from or as a consequence of, an insured direct loss. Individual Insurance: Policies that afford protection to the policyholder and/or his family (as distinct from group insurance). Sometimes it is referred to as personal insurance. Industrial Policy: A Policy with a face amount of $1000 or less for which the premiums are usually payable weekly or monthly and collected in person. Inherent Explosion: Explosion caused by the normal process of a risk (as opposed to one caused by external causes), e.g., a dust explosion in a grain elevator Inherent Vice: The characteristics of any physical property which are expected to cause deterioration or damage to that property without help, e.g., milk sours eventually, and wooden houses depreciate over time. Excluded by most insurance policies. Injury: An act that damages or destroys a person or property. Inspection Report: A report that contains general information regarding the health, habits, finances, and reputation of an applicant made by a firm that specializes in rendering this type of service. Insurable Interest: A potential for financial loss from a certain event that a person must have before acquiring insurance against that event. Insurance: The transfer of risk from the insured to the insurer. The insurer promises to pay the insured or beneficiaries an amount of money, services, or both for economic losses sustained from an unexpected and accidental event, during a period of time for which the insured makes a premium payment to the insurer. Insurance Clause: A clause that defines and describes the scope of the coverage afforded and the limits of indemnification. Insurance Company, Alien: One that was organized under the laws of a country other than the United States. Insurance Company, Domestic: One conducting business in the state in which it was organized. A company who has its home office in the state in which it is conducting business. Insurance Company, Foreign: One conduction business in a state other than the state in which it was organized. A company having its home office in a state other than the one(s) in which it is conducting business. Insurance Services Office (ISO): A voluntary, nonprofit association of property and casualty insurance companies providing a great variety of services on a national basis. Insured: The person(s) or party(ies) protected by an insurance policy, synonymous with assured. Some property-liability policies distinguished between the named insured another insured. Insuring Clause (Agreement): The portion of a policy that describes the risk that the insurer has agreed to assume. Intermediary: One who arranges reinsurance between companies. A reinsurance broker. J Jettison: In ocean marine insurance, the voluntary throwing overboard of part of the cargo or gear of the vessel to lighten the load and save the vessel from conditions of stress at sea. Jewelers Block Insurance: Broad policies insuring jewelers against all loss to their stock in trade. Generally considered too be a type of inland marine insurance. Joint Life Insurance: Insurance on the lives of two or more persons with the face amount payable in the event of death of either (or any one) of them. Joint Ownership Coverage: The purpose of this coverage is to provide coverage for individuals, other than husband and wife, residing in the household or nonresident relatives who jointly own a private passenger auto or a pickup or van that has a gross vehicle weight of less than 10,000 lbs. and is not used for the delivery or transportation of goods and materials. Juvenile Insurance: Life insurance policies written on the lives of children within specified age limits. K Key Person Insurance: An individual policy designed to reimburse an employer for the loss of a key person's service due to his or her death. Usually, the employer pays the premium and is the beneficiary. L Lapse: The termination of a policy for nonpayment of premium; used more commonly in life insurance. If the insurance contract becomes void for other reasons, it is also said to have lapsed. Larceny: Theft of personal property. Modern Criminal laws include obtaining property under false pretense and embezzlement, which common law did not include in theft. Law of Large Numbers: A mathematical concept that postulates that the more times an even is repeated (in insurance, the large number of homogeneous exposure units), the more predictable the outcome becomes. In a classic example, the more times on flips a coin, the more likely the results will be 50% heads, 50% tails. Legal Liability: Liability imposed by laws, as opposed to liability arising from an agreement or contract. Legal Reserve Life Insurance Company: An insurance company that operates under insurance laws that specify the minimum amount of reserves that he insurance company must maintain on its policies. Level Premium: A premium that remains unchanged throughout the life of the policy. Level Term Insurance: A term Contract whose face amount remains level throughout the life of the contract but whose premium increase according to the age of the insured. Libel: To publish defamatory statement about another. The general distinction between libel and slander is that the first must be in writing or similar permanent form, while the later is oral. Liability Coverage: Covers damage for Bodily Injury (BI) or Property Damage (PD) for which an insured becomes legally responsible because of an auto accident. Life Expectancy: The average number of anticipated years of life remaining for individuals who are the same age in accordance with the mortality table indicated in the policy. Life Insurance: Insurance upon the lives of human beings that create an immediate and guaranteed estate at the death of an insured. Limited Pay Life Insurance: A plan of permanent life insurance under which the premiums are payable for a specified number of years (5, 10 years or to age 65). After which the policy can continue to remain in effect for life without it being necessary for the insured to make any additional payments. Limit or Limit of Liability: According to the terms of a given policy, the most an insurer will pay for any one loss. Lloyd's of London: A collection of individuals who assume policy obligations as the individual obligation of each. Loading: An amount that is added to net premiums in order to cover the insurance companies operating expenses and possible contingencies. The cost of acquiring new business, collecting expenses, and general management expenses constitute' loading. Loan Value: The amount specified in a policy that the insurance company will lend to an insured at the rate of interest which the insurance company may charge for such loans (as indicated in the policy). Loss: 1) The amount the insurer is required to pay because of a happening against which it has insured. 2) A happening that causes the company to pay (e.g., any reduction in quantity, quality, or values of insured property resulting from an insured peril. 3) The over-all financial result of some operation, as opposed to "profit." 4) The amount suffered by a person or property, with or without insurance. Loss of Use Insurance: Insurance that compensates the policyholder for inability to use property destroyed or damaged by an insured peril. Loss Payee: Party besides the insured (such as a lending institution) that has an insurable interest in the vehicle insured. Also called a Lienholder. M Malpractice: Improper actions or failure to exercise proper skill by a professional or others involved with the care of the human body; such as a physician, dentist, blood bank, etc. Marine Insurance: One of major divisions of insurance (life, health, property, marine, casualty, surety), primary written for property in transit. If my sea, "ocean" marine (or "wet" marine); otherwise, "inland" marine. Material Fact: Information having objective reality that influences an insurer in granting or not granting insurance coverage. Maturity: The date on which a policy becomes payable due to the death of the insured, or as a result of an insurer's living to the end of an endowment period. Medical Payment Coverage (Med): Pays medical expenses incurred in an auto accident for the insured and passengers in the insured's car. Mercantile Risk: A property location used for the selling of merchandise, as distinguished from a habitational risk or a manufacturing risk in which goods are processed. Merit Rating: A system of rating in which the experience of the individual risk is a factor in determining the rate. Minimum Premium: The lowest flat or eared policy charge for which a policy will be issued or for which coverage will be provided. Misrepresentation: Misleading the company as to material facts affecting a policy or the settlement of a loss, either by directly or indirectly lying. Misrepresentation as to material facts voids policies. Mobile Home Insurance: A special policy has been designed to meet the needs of mobile home owners or occupants, covering physical damage to the home, contents and personal liability while the home used as a permanent residence. Moral Hazard: A condition or characteristic by which an insured intends to profit from an insured loss. Morale Hazard: The condition that exists when an insured becomes lax in matters of safety and fire prevention because insurance is in place to pay for a loss which may occur. Mortality Table: A statistical table that indicated the probability of death and survival at each age. Multi-Peril Insurance: Synonymous with multi-line insurance, a policy including both property and casualty coverage (e.g., a homeowners policy). Mutual Insurance: Protection written by an incorporated insurer having no capital stock and directed by policyholders that are its owners. Mutual Life Insurance Company: A life insurance company owned and controlled by its policyholders. Mutual Life Insurance Companies issue participating policies. Mysterious Disappearance: The vanishing of insured property in an unexpected manner. N Named Insured: The person designated in the policy as the insured, as opposed to someone who may have an interest in a policy by not be shown by name. Named Peril Policy: One that specifies the exact cases of loss for which the insurer will pay, as contrasted with a policy that insures against "all risks" (and then lists only exclusions, modifications, and conditions). National Flood Insurance Act of 1968: An act establishing a basis for flood insurance as a joint venture between the private insurance industry and the Federal Government. The Federal Government has since taken over the entire program. Negligence: The Failure to exercise the care that an ordinary prudent person would exercise: either doing that which a prudent person would not do, or failing to do that which a prudent person would do. Net Amount at Risk: The difference between the face amount of a policy and the reserve. Net Premium: 1) The gross (paid) premium less any return premium or dividend. 2) The premium less the commission. No-Fault Insurance: Form of automobile insurance where each insurance company pays the damage of its own insureds, regardless of who was at fault for the accident. Noncontributory Plan: A group employee benefit under which the employer pays for the full cost of the benefits for his employees. Non-forfeiture Values (Options): Benefits required by law to be made available to the insured (or his beneficiary) in the event that he discontinues his premium payments. These provide that he does not forfeit or lose all that he has invested in the policy. Non-Medical Life Insurance: Insurance that is issued without requiring the applicant to submit to a medical examination. The insurance company relies on the applicant's answer to the questions rewarding his physical condition, personal references, and inspection reports. However, the insurance company retains the right to require a medical examination, if an investigation indicates a need for one. Nonowned Vehicle: An auto that is not furnished or available for the regular use of the insured or any family member. Non-Participating Life Insurance: Insurance that does not pay dividends to the policyholders. Nonrenewal: Decision made by the insurance company not to extend coverage for another policy period after the current policy period expires. O Obligee: The party in whose favor a bond runs, i.e., the party protected from loss under the bond. Obligor: One bound by the obligation covered by a bond. Also called the "principal". Occupancy: 1) The use to which a building is put. 2)The type of contents a building contains. Occurrence: In insurance, the term may be defined as continual, gradual, or repeated exposure to an adverse condition which is neither intended nor expected to result in injury or damage, as contrasted with an accident, which is a sudden happening. Omnibus Clause: A part of an automobile or yacht liability policy which extends coverage to persons and organizations other than the named insured, such as members of the insured's family, servants and others using the automobile with the owners permission. Optional Benefit: An additional benefit that may be included in a policy at the applicant's request. Ordinary Life Insurance: Insurance policies of $1,000 or multiples thereof that provide coverage for the entire life of the policyholder and for which the premiums are payable until death. It is also referred to as whole life insurance or straight life insurance, and is different from term insurance in that it includes a cash value buildup. Other Insurance: A Personal Auto Policy provision that describes how much the insurer will pay when more than one insurance policy or coverage applies to the same loss. Other Than Collision Coverage (OTC): Covers damage to a covered auto caused by something other than collision coverage, such as hail, glass breakage and theft. Also called Comprehensive Coverage. Over Insurance: Coverage in amounts greater than the value of the property insured or the amount of loss sustainable by the insured (e.g., several policies of hospitalization insurance for a total amount in excess of daily room charges). P Package Policy: A combination of property-liability coverages of two or more separate policies in on contract with one premium. Paid-Up Additions: An additional amount of insurance purchased through dividends (single premium insurance) which increase the amount of protection afforded. Paid-Up Insurance: Life Insurance on which future premium payments are not required. Frequently, the term is used to identify a 20-payment life insurance policy on which 20 annual premiums have been paid. Fractional paid-up insurance is the term applied to the policy that is issued under the non-forfeiture option. Pair-and-Set Clause: An Inland marine policy provision which requires the insurer, at the insured's option, to restore or pay for the entire pair or set of jewelry or fine arts when only part has been lost, destroyed, or damaged. Partial Loss: Is one involving less than all of the values insured or calling on the policy to pay less than its maximum amounts. Participating Insurance: Insurance that entitles the policyholder to share in the divisible surplus of the insurance company through dividends. Particular Average: In ocean marine insurance, a loss (partial or total) which falls on one or more property(ies) or interest(s) being shipped, as opposed to aGeneral Average. Payor Clause: A clause that provides for the waiver of premiums on a child's policy following the death or the total disability of the adult applicant for the child's policy. Penalty of the Bond: In a surety bond, the amount guaranteed or the limit of the company's liability. Peril: The cause of loss (e.g., fire, explosion, accident). Perils of the Sea: Causes of loss unique to the operation of ships and their cargoes, i.e., sinking, stranding, heavy weather, etc., but not fire lighting, or theft. Personal Articles Floater: Worldwide coverage on an "all-risk" basis for scheduled, valuable personal property. Personal Auto Policy: Coverage designed to replace both the family auto policy and the special package auto policy as the "standard" form for insuring private passenger autos and certain types of non-business trucks. Personal Effects Floater: An inland marine policy that insures articles (usually accompanying travelers) against "all-risk" while away from home. Personal Injury Protection (PIP): Also known as no-fault insurance, providing insurance for medical costs, loss of earning, additional living expenses, and funeral costs for occupants of the insured automobile and pedestrians other than those insured under other policies. Physical Hazard: Danger of loss or liability arising from the condition, occupancy, or use of property, as opposed to such danger arising from the character of the policy holder. Pilferage: Theft in small quantities, e.g., not limited to the taking of a whole package or all of the property insured. Piracy: Robbery on the high seas, typically the seizure of a vessel and cargo. Policy: The printed document issued by the insurance company to the insured that is the insurance contract. Policy Fee: A small fee charged by some insurance companies for the first year (or portion thereof) in addition to the regular premium. Policy Form: Document used to assemble an insurance policy that describes the policy coverages, exclusions and conditions. Policy Holder: The party to whom a policy is issued, and who pays a premium to an insurer in consideration of the patter's promise to provide insurance protection. Policy Loan: A loan made by an insurance company to an insured under his policy (not in excess of its cash value). Policy loans may be assessed a fixed interest rate or an adjustable rate. Policy Period: Period of time listed in the Declaration when coverage under the policy is in effect. Policy Term: The period of time for which the policy will normally remain in existence. Premises: The building (or section of a building) insured or containing the insured property. Depending on policy conditions, it may also include an adjacent area. Premium: The amount of money an insurance company charges to provide coverage. Primary Insurance: When two or more coverages or policies apply to the same loss, the one that pays first, up to its limit of liability or the amount of the loss, whichever is less. Principal: in suretyship, the principle is the one whose honesty, fidelity, or ability to perform is guaranteed. Private Passenger Auto: A four-wheel motor vehicle, other than a truck, owned or leased for at least six continuous months. Proceeds: The net amount of money that is payable by the insurance company at the death of an insured or when the policy matures. Product Liability: The liability that a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured. Profits Insurance: Coverage for the loss of profit that the policyholder could have earned that the merchandise destroyed in a fire (or by a covered peril) been sold otherwise. Proof of Loss: A written statement of a claim giving the pertinent facts and data that may be in the form of an affidavit. Property Damage (PD): Physical injury to, destruction of or loss of use of tangible property. Pro Rata Cancellation: Termination of a policy by the insurer, for which the return premium due the policyholder is the full proportionate part for the un-expired term. Proximate Cause: That which brings about a result without the intervention of any other force. Important in insurance since it establishes which policy(ies) will pay for a loss; e.g., the one insuring the perils which was the proximate cause of the loss. Public Adjuster: One who, for a fee, represents policyholders in the adjustment of their losses with insurance companies. Punitive Damages: Damages awarded to a plaintiff that are meant to punish the defendant for anti-social actions rather than reimburse the plaintiff for loss. Q Quota Share Reinsurance: A form of pro rata reinsurance (proportional) in which the reinsurer assumes an agreed percentage of each insurance policy being insured and shares all premiums and losses accordingly with the reinsured. R Rate: The price for a unit of insurance; all units in a given policy, multiplied by the rate per unit, produce the premium. In fire insurance, the price per $100 of insurance for one year. The basis for pricing other types of insurance varies greatly i.e., payroll is used in workers compensation insurance, area of retail floor space or sales volume is used in certain types of general liability insurance, etc. Rating: A method under which an insurance company can issue a policy for a subsequent risk by increasing the premium based on the increased risk involved. Rating Factor: Characteristics that differ depending on the individual risk that is being rated, such as the type of vehicle to be insured and the age and sex of the insured driver. For most personal auto coverages, they are used to modify the finished rate. Rebating: Paying, offering, or giving anything of value (or any valuable consideration not specified in the policy) to any person as an inducement to purchase a policy of insurance. Rebating is illegal and both parties are guilty of it when it is done knowingly. Reduced Paid-Up Insurance: A non-forfeiture value (option) in a policy that provides for the continuation of the insurance but at a reduced amount (sometimes called Fractional Paid-Up Insurance). Reinstatement: The resumption of coverage under a policy that lapsed. Reinsurance: 1) The transaction whereby an insurance company (the reinsurer), for a consideration, agrees to indemnify another insurance company known as the ceding company (the reinsured) against all or part of a loss which the latter may sustain under a policy of policies it has issued. 2) When referred to as "a reinsurance," the term means the relationship between reinsured and reinsurer. Removal: The taking of property to some place other than at which it was insured. The standard fire insurance policy used in most states insures against damage done in removing the insured property from the path of the fire. Renewable Tern Insurance: Insurance that may be renewed at the end of the term, for another term, without evidence of insurability. The rates increase at the end of each term and are based on the attained age of the insured at the time. Renewal: Continuance of coverage under a policy beyond the initial period. Rental Value Insurance: Insurance which reimburses the owner-occupant of a building for the cost of renting some other place if the building is rendered unusable by some peril insured against. Rent Insurance: Insurance that reimburses a building owner against loss of rental income if the building is not usable by a tenant because of some peril insured against. Replacement Cost Insurance: Protection that pays the cost to restore or replace damaged or destroyed property without deduction for depreciation. Automatically included in homeowner's forms. Replacement Vehicle: A vehicle the insured acquires during the policy period that replaces one shown in the Declarations. Representation: Information communicated by the prospective insured to an insurer that will influence the latter's underwriting decision. Reserve: A sum (required by law) set aside by an insurance company to assure the payment of future claims. Retention Clause: A clause in a policy of reinsurance by which the ceding company agrees to retain for it own accounts a certain part of the line. Rider: Another word for Endorsement. Risk: 1) Defined variously as uncertainty of loss, chance of loss, or the variance of actual from expected results. However defined, its existence is the reason people by insurance. 2) The subject matter of an insurance contract, e.g., the building, cargo, or liability exposure insured. Robbery: the taking of property by violence or threat of violence. Running Down Clause: The clause in an ocean marine hull policy which covers damage done to another ship by collision, and other property damage caused by collision. S Safe Burglary Insurance: Protection against loss of property caused by forcible entry into a safe or vault. Damage to safes, vaults, and other property on the premises resulting from burglary is also covered unless caused by fire. Salvage: Property in a loss saved from further loss. Schedule: A list of insured properties, and the amount of insurance on each, which is attached to a "schedule" policy, as distinguished from a "blanket" policy. Schedule Bond: A fidelity bond covering a number of named individuals or positions (irrespective of who occupies them), as contrasted with a blanket bond, which covers all. Schedule Policy: A listing of two or more items of property in a policy, with specified amounts of insurance applying to each item. Self Insurance: The retention of sufficient exposure units by an entity to permit the operation of the Law of Large Numbers. Self insurance is a term often mistakenly used to describe the situation when an entity decided to retain its own risks. Settlement Options: Methods (other than immediate payment in lump sum) by which an insured (or beneficiary) may choose to have the proceeds of an insurance policy paid. Short Rate Cancellation: Termination of a policy by the policyholder before its stated expiration. The insurer refunds the policyholder a return premium in less amount than the pro rata part that is still unearned to compensate the insurer for expenses incurred to that point, (since the termination is at the request of the policyholder). Single Limit of Liability: Policy limit that applies to all bodily injury and property damage arising from a single accident. Single Provisions: Certain provisions that must be included in a Life Insurance Policy. Social Insurance: Insurance provided by government. Split Limit of Liability: Policy that has separate limits per person and per accident for Bodily Injury and a per accident limit for property damage. Stated Amount Insurance: Insurance written to cover an item of property for a specific amount of insurance. Stock Life Insurance Company: A Life Insurance Company owned and controlled by its stockholders who share in its divisible surplus. Generally, Stock Insurance Companies issue Non-Participating Life Insurance. However, some of them also issue Participating Life Insurance. Subrogation: In insurance, the substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for a loss paid by the insurer. Substandard Risks: Risks that do not met minimum underwriting criteria. Sue and Labor Clause: Language in marine and inland marine policies requiring the policy holder in event of loss to take all necessary means to save the property from further loss and recover from others who caused the loss. The insurer agrees to pay the costs, even if they exceed the policies limit of liability. Suicide Clause: A provision specifying that in the event the insured commits suicide within tow years from the date the policy was issued, the insurance company's liability is limited to the payment of a single sum equal to the premium(s) actually paid (less any indebtedness due to the insurance company). Supplemental Contract: An Agreement between an insurance company and an insured under which the insurance company retains the lump sum payable (under a Life Insurance Policy) and makes payments to the insured or the beneficiary in accordance with the settlement option selected by the insured. Surety Bond: A written agreement wherein on part, called the surety, obligates itself to a second party, called the obligee or beneficiary, to answer for the default of a third party, call the principal in failing to perform specified acts within a stated time. Surplus: The remainder after a company's liabilities are deducted from its assets. Systematic Premium Plan (Check-O-Matic Plan): A plan under which the insured authorizes a ban k to deduct the necessary funds from this account each month to pay a premium that is forwarded to his insurance company by the bank. T Temporary Substitute Auto: An auto or trailer that the named insured does not own that is used as a temporary substitute for a vehicle that is out of normal use because of breakdown, repair, servicing, loss, or destruction. Tenants Policy: A form of homeowners policy sold to persons who rent their living quarters or are co-op apartment owners. Term Insurance: Insurance that is generally designed to afford coverage for a limited number of years. Usually no provision is made for cash values. It can be described as "Pure Protection". Theft: A broad term meaning the wrongful taking of the property of another. Third Party: The claimant under a liability policy, so called because the first two parties are the insured and insurer, who enter into the insurance contract which pays the third party's claims. Total Disability: An illness or injury that prevents an insured continuously performing every duty pertaining to his occupation or from engaging in any other type of work for remuneration. (This working varies from one insurance company to another.) Total Loss: 1) Loss of all the insured property. 2) Under a given policy, a loss involving the maximum amount for which the policy is liable. Towing and Labor Coverage: Coverage that pays for charges incurred by the insured for towing and labor charges. Trailer: Vehicle designed to be pulled by a private passenger auto, pickup or van. Treaty, Reinsurance: A reinsurance agreement between an insurance company and a reinsurer, usually for one year or longer, which may be divided into two broad classifications: 1) The participating type which provides for sharing of risks between the ceding company and the reinsurer. 2) The excess type that provides for indemnity by the reinsurer only for loss which exceeds some specified predetermined amount. Twisting: Inducing an insured to cancel his present insurance and replace it with insurance in the same or another insurance company by misrepresenting the facts or by presenting an incomplete comparison. U Umpire: A person selected by two appraisers to help settle disputes in property insurance claims. Unauthorized Insurance: Insurance written by an insurer no licensed by the country or state in which the risk is located (non-admitted company). Underwriter: One who accepts or rejects risks for an insurer (originally, by writing the person's name under the contract of insurance being issues). Underwriting: The analysis of information pertaining to an applicant which was obtained from various sources and determination of whether or not the insurance should be: 1) Insured at request. 2) Offered at higher premium. 3) Declined. Unearned Premium: The portion of the premium representing the un-expired portion of the policy term. Underinsured Motorists Coverage (UIM): Coverage that reimburses the insured for the difference between the actual damage sustained for bodily injury and the amount of liability insurance carried by the at-fault driver if the at-fault driver's limits are less than the insured's. Uninsured Motorists Coverage (UM): Pays for bodily injury sustained by the insured that is caused by an uninsured motorist. Uninsured Motor Vehicle: A vehicle that: has no Liability coverage; has Liability coverage that does not meet the state's financial responsibility requirement; is driven by an unidentified hit-and-run driver; or has invalid Liability coverage because the insured is insolvent or denies coverage. Unoccupied Building: The temporary absence from a building of an occupant, but with the occupant's furniture and personal effects remaining, as opposed to a Vacant Building, which has neither occupants nor contents. V Vacant Building: A building with nothing in it. If the furniture is in the building and the owner intends to return, the building is Unoccupied. Valued Policy: A policy in which the company agrees that the property insured is worth the amount of insurance, and therefore in the event of total loss pays the face value of the policy without need of proof of the value at the time. Vandalism: Damage done maliciously, included in the extended coverage endorsement. Also called "malicious mischief". W Waiver: The intentional relinquishment of a known right. Waiver Endorsements: An agreement that waives the liability of the insurance company for a loss that would normally be covered under the policy.