Insurance Glossary

a b c d e f g h i j k l m n o p q r s t u v w x y z

a Abandonment: - the giving up of property by the insured to the insurance company in order to collect the value of the property rather than restoring or repairing the property.
Absolute Liability: - responsibility without regard to fault or negligence.
Accounts Receivable: - money owed to the insured by the insured's clients.
Act of God (Act of Nature): - an event produced by a physical cause of nature, and not within human control or intervention.
Actual Cash Value (ACV): - replacement cost minus depreciation.
Admitted Insurance Company: - an insurance company that is authorized and licensed to do business in a state.
Agent: - a person empowered to act on behalf of another.
Aleatory Contract: - a contract in which there is an unequal exchange between parties because the element of chance is involved in performance under the contract.
Alien Insurer: - an insurance company formed and domiciled in a country outside the United States.
Apparent Authority: - authority an agent appears to have to a reasonable person.
Assumption of Risk: - when one knowingly and voluntarily exposes themselves to a known danger.
Auto: - a land motor vehicle, trailer, or semi; -trailer designed for use on public roads, but does not include "mobile equipment."
Automatic Insureds: - persons who are granted insured status because they fit into a category or class of persons described in the policy provisions.
b Bailee: - someone who has rightful possession of the property of another.
Binding Authority: - authority that is granted to the insurance agent as outlined in the company's agent contract.
Bodily Injury: - bodily harm, sickness, or disease, including death that results from the harm, sickness, or disease.
Broker: - an individual who acts or aids in the negotiation of insurance contracts, in placing risks, or in soliciting or effecting contracts, as the agent of the applicant/buyer and not as the agent of the insurance company.
Burglary: - the taking of property from within a premises by a person unlawfully entering or breaking out of a premises as evidenced by marks of forcible entry or exit.
Business: - includes trade, profession, or occupation.
Business Income: - net income (net profit or loss before income tax) that would be earned and continuing normal operating expenses (including payroll).
c Cancellation: - the termination of the insurance policy by either party.
Coinsurance: - a rating and underwriting concept that is designed to encourage an insured to purchase an amount of insurance nearly equal or equal to the full value of the property being insured.
Collapse: - the caving in or giving way of a building or structure.
Combined Ratio: - a ratio that combines the company's loss ratio and the company's expense ratio.
Comparative Negligence: - a defense based on a statutory modification of contributory negligence in which both parties are negligent and damages are apportioned between them according to their comparative degrees of negligence.
Concealment: - the intentional deceit of a person or organization by failing to disclose complete and correct information.
Consequential (Indirect) Loss: - a loss or damage that results from an insured's inability to use his/her property because of direct loss to the property of others.
Conditional Contract: - an insurance contract in which the insurer's promise is conditioned upon (dependent upon) certain things occurring or being done.
Contribution by Equal Shares: - when a Liability Insurance policy says it and another company will pay a share of the loss equally until either the loss is paid or the Liability Insurance policy has paid its limits.
Contributory Negligence: - when a person or organization adds in any way to his/her own injury and is barred from recovery.
d Damages: - a sum of money that compensates an injured party (an individual or organization).
Deductible: - the amount of loss, under an insurance policy, which an insured must pay before the insurance company will pay its portion of the loss.
Direct Loss: - a loss or damage as a direct result of a covered peril or cause of loss.
Direct Mail (Direct Response) System: - the writing/selling of insurance by mail or phone.
Direct Writing System: - a system where the direct writer producer is an employee of the insurer and not an independent contractor.
Disappearance: - when an insured once had the money and/or "securities," and now does not know where they are.
Doctrine of Reasonable Expectations: - during a dispute being decided by the courts, the courts ask what a reasonable person would expect in a particular situation.
Domestic Insurer: - an insurance company that is incorporated in, domiciled in, and organized under the laws of a state.
e Employee: - a person in the service of another, under a contract of hire, who acts under the direction and control of the person who hired him/her.
Employee of an Insurance Company: - an agent of the company in a limited agency capacity.
Estoppel: - the removal of a right or claimed position by acting in a manner that is inconsistent with that right or position.
Excess Reinsurance: - a form of Treaty reinsurance, where no insurance is ceded, only the losses are ceded.
Exclusive Agency System: - a system made up of agents who represent only one insurance company or a group of companies under common ownership or control.
Expense Ratio: - a ratio that indicates the percentage of premiums used to pay the insurers' operating expenses.
Experience Rating: - a rating that considers the individual loss experience of a particular insured. It applies loss experience to the present policy year.
Exposure: - a noun meaning subject to a loss.
Express (Actual) Authority: - authority expressly given by the insurer, either orally or in writing.
f Facultative (or Specific) Reinsurance: - a form of reinsurance using offer and acceptance of individual risks, in which under a contract of reinsurance, the reinsurer retains the faculty to accept or reject each risk offered by the ceding company.
Family Member: - a person related to the insured by blood, marriage, or adoption who is a resident of the insured's household.
Foreign Insurer: - an insurance company organized and domiciled outside the borders of your state.
Fraud: - an intentional manipulation of the truth, and the act of getting someone to rely on that manipulation of the truth, which results in the person's detriment.
g General Damages: - an award based on a measure of intangible damages inferred from the Special Damages and other facts and circumstances (e.g., pain and suffering).
h Hazard: - is a condition within an exposure that may lead to an incident, "a peril about to happen."
i Implied Authority: - authority of the agent, which is not specifically expressed or communicated, but which is consistent with the agent fully exercising the express authority granted by the insurer.
Indemnity: - to compensate or reimburse. The Principle of Indemnity holds that property and casualty insurance contracts should do no more than indemnify, meaning to restore the insured to the approximate financial position prior to loss.
Independent Agency System: - involves self-employed parties who enter into contracts with usually more than one insurer to represent the insurers in dealings with the public.
Independent Contractor: - one who undertakes an independent calling so as to provide work or service for another person.
Insurable interest: - a financial interest a person has in the object being insured.
Insurance: - a technique or business of transferring the risk of an individual or organization to another by means of a contract.
Insurance Agent: - a person authorized by an insurer to solicit applications, collect premiums, and write policies on behalf of the insurer.
j Judgement Rate: - a rate that is applied solely to individual insureds by the insurance company.
l Law of Large Numbers: - a mathematical principle which states the larger the number of exposures, the closer the actual results will come to equaling the expected outcome.
Lloyd's of London: - an association of private underwriters, each of whom underwrites (backs) insurance contracts on a basis of personal liability.
Loss Ratio: - a comparison of the amount of losses to the premium collected.
m Managing General Agent (MGA): - a person or firm who has an independent business that performs for one or more insurers some or all of the functions typically attributable to a regional or branch office of the insurer.
Market Value: - the value of property (either real or personal) as determined by the amount of money people would pay for the property, knowing all the relevant facts.
Mass Marketing: - an attempt by insurance companies to provide some forms of insurance in a more economical fashion.
Misrepresentations: - a misstatement of facts regarding the subject of insurance (the item being insured).
Mutual Company: - an incorporated insurance company owned by its policyholders.
n Negligence: - a failure to exercise that amount of care an ordinarily prudent person would use to protect others from unreasonable risk of harm or injury.
Non-concurrency: - a term used to describe a situation where there are two or more insurance policies not written with the same coverage, or effective dates.
Non-economic loss: - defined as pain, suffering, and other non-monetary losses.
Non-insurance Transfer: - the transfer of risk through a contract other than an insurance contract.
Non-renewal: - the action by the insurance company to terminate insurance coverage at the expiration date or anniversary date of the policy.
o Occupying: - means in, upon, getting in, on, out, or off.
Occurrence: - an accident, including continuous or repeated exposure to substantially the same conditions.
p Peril: - a cause of loss.
Policy Limits: - the maximum dollar amount an insurance policy will pay for a covered loss. Policy Period; - the period of time for which the insurance policy provides coverage.
Policy Territory: - the geographical area in which accidents, occurrences, or events must happen to have coverage under the insurance policy.
Property Damage: - physical damage to, destruction of, or loss of use of property.
Pro-rata Reinsurance: - a form of reinsurance where the treaty is set up on the understanding that a certain part of every exposure will be shared on an agreed amount.
Punitive Damages: - the sum of money in excess of the amount required to compensate for loss, and which is imposed in order to punish such conduct now and deter similar conduct in the future.
r Reciprocal: - a group of individuals or organizations, called subscribers, who join together into an association for the purpose of insuring one another.
Reduction (Loss Control): - the use of any one method or a combination of methods to reduce loss frequency or loss severity.
Reinsurance: - a process involving the transfer of risk from one insurer to another insurer.
Replacement Cost: - the cost to replace damaged property with like kind and quality without taking into account depreciation.
Retention: - acceptance or assumption of the risk of loss, which means any loss is paid out of pocket.
Risk: - is the chance of loss; risk is the uncertainty of loss; risk is also the variation from the expected outcome over time; and risk is the difference between expected losses and actual losses.
Risk Management: - "the practice of protecting an organization from financial harm by identifying, analyzing, and controlling risk at the lowest possible cost." (Robert J. Marshbum, CRM, CIC, ARM).
Robbery: - the unlawful taking of property from a person by actual violence or threat of violence.
s Salvage: - damaged or recovered stolen property taken over by the insurance company.
Serious Injury: - an injury resulting in death, serious impairment of body function, or permanent serious disfigurement.
Sharing: - a method of handling risk that involves the potential loss exposure being distributed among a number of persons.
Sinkhole Collapse: - damage caused by the sudden sinking or collapsing of land into an underground empty space typically caused by water on limestone or dolomite.
Solicitor: - a person who is hired and authorized by the insurance agent to solicit applications of insurance.
Special Damages: - the measurable dollar amounts of an actual loss.
Stated Amount: - a method of fixing the maximum amount payable in an insurance policy.
Statute of Limitations: - any statute that prescribes the time limit in which a legal action must be brought.
Stock Company: - an incorporated insurance company owned by its stockholders.
Strict Tort Liability: - holds sellers, distributors, and manufacturers of products responsible for defective or unduly hazardous products.
Subrogation: - the right of an insurance company to recover an amount of money paid to an insured for a loss when the loss is someone else's fault.
t Theft: - any act of stealing.
Tort: - a civil wrong (as opposed to criminal) against another party.
Transfer: - a technique involving one party transferring the uncertainty of loss to another party or parties.
Transportation Cause of Loss: - includes loss or damage arising from collision, derailment, or overturn of a vehicle, stranding or sinking of vessel, or collapse of bridges, piers, or docks.
Treaty: - a form of reinsurance in which a contract of reinsurance automatically establishes the terms for reinsuring a class or classes of business.
u Underwriting: - the process of selecting a risk and assigning a proper rating classification (to calculate the correct premium) in a manner that the insured obtains coverage and the insurance company obtains a profit.
Unoccupancy: - describes a building that may contain furnishings and/or personal property, but it does not have people occupying it.
Utmost Good Faith: - a contract is considered to be a contract of "utmost good faith" when the parties to the contract rely heavily on the honesty and integrity of each other.
v Vacancy: - defined in the commercial property form as not enough business personal property to conduct normal operations. In a rather broad sense, it means no contents.
Valued Policy: - declares the amount that will be paid in the case of a total loss of the property.
w Waiver: - the voluntary giving up of a known right.
Warranty: - a statement that promises or guarantees that something is absolutely true or will be true in the future.