Insurance Terms Glossary

Whether you’re new to the insurance business or a veteran of many years, there are still occasions where you need a refresher on some of the terms native to the insurance business.

ACCOUNTS RECEIVABLE:
Provides coverage for sums due from customers that you are unable to collect due to damage to your records, plus additional expenses related to reconstructing your records.

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

ACORD:
This is a global, nonprofit standards development organization serving the insurance industry. Its mission is to facilitate the development of data standards and standard forms. ACORD members include hundreds of insurance and reinsurance companies, agents and brokers, software providers, and industry associations worldwide. (ACORD: Association for Cooperative Operations Research and Development)

ADDITIONAL INSURED:
Extends liability policy protection to include those listed on the form, such as Vendors, Managers of Premises, and others. This is needed because your policy does not provide automatic coverage for these individuals/entities. The company may initiate a charge for each Additional Insured added to your policy.

ALS:
Actual Loss Sustained. Referring to Business Income, the policy limit is the ALS, for a specific period of time, such as: 12 Months Actual Loss Sustained.

ADVERTISING INJURY:
This coverage includes libel or slander; invasion of privacy; misappropriation of advertising ideas or style of doing business; or infringement of copyright, title, or slogan, all in the course of advertising the Insured’s goods or services. Some of the newer policies do exclude copyright infringement so make sure to check with your agent.

AGREED AMOUNT:
Waives ‘Coinsurance’ requirements. Covered Property claims will be valued with no coinsurance penalty, up to the policy limit.

AGGREGATE LIMIT:
With regard to ‘Commercial General Liability’ insurance, and indicates the total amount of coverage that the insured has under the policy period, no matter how many separate accidents might occur. Thus, the policy will never pay out, in total, over the policy period, more than the Aggregate Limit. Without an Aggregate Limit, the policy could be responsible for an unlimited number of claim payments, each one equaling the policy’s Liability limit.

AUTOMOBILE LIABILITY:
Liability resulting from the use of an automobile.

BAILEES CUSTOMERS GOODS FLOATER:
This policy is used to insure against loss to property of others that is in your possession, regardless of your legal liability.

BLANKET INSURANCE:
Property insurance that covers more than one type of property at one location or one or more types of property at more than one location.

BACK-UP OF SEWERS & DRAINS:
damage caused by water that backs up through sewers, drains or overflows from a sump, sump pump or related equipment.

BOBTAIL:
Protects a tractor when it’s being operated without a trailer, regardless of whether or not it’s under dispatch.

BOILER AND MACHINERY / EQUIPMENT BREAKDOWN:
Covers damage to property, caused by pressure vessel explosion, mechanical breakdown and electrical disturbance. These perils would not be covered by the ‘Special Perils’ policy.

BONDS:
Protection provided by a bond is not insurance. Coverage under an insurance policy involves a two-party agreement whereas in a bond, the person who pays the premium, known as a principal, is bonded for an action by a surety for the benefit of a third party commonly called a beneficiary. Bonds are distinguished between Surety bonds, which guarantee the performance of a contract, or Fidelity bonds, which protect against the dishonesty of employees.

BOP POLICY (Business Owners Policy):
An easy-rate policy designed for small business. May be a Package Policy, or a single line (mono-line) policy.

BUILDER’S RISK INSURANCE:
Property policy covering loss to buildings or structures in the course of construction. This is property coverage only. Liability coverage must be purchased separately.

BUILDING:
Permanent structures at the premises described in the Declarations, including permanently installed machinery and equipment. Also referred to as Real Property.

BUSINESS INCOME / EXTRA EXPENSE:
A commercial property form providing coverage for “indirect losses” resulting from property damage, such as loss of the business’ income and extra expenses incurred. It has replaced earlier Business Interruption and Extra Expense forms.

BUSINESS INCOME – DEPENDENT PROPERTY:
Covers loss of Business Income during suspension of your operations due to damage at a property operated by another whom you depend on to deliver materials or services, accept your products or services, manufacture products for delivery to your customers or attract customers to your business.

BUSINESS LIABILITY:
The term used to describe the liability coverages provided by the Businessowners Liability Coverage Form. It may include liability for bodily injury, property damage, personal injury, advertising injury, and fire damage.

BUSINESS CONTENTS / PERSONAL PROPERTY:
Traditionally known as “contents,” this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured’s business.

CASH on PREMISES:
Money & Securities are covered separately from other property limits. It is not included within the definition of ‘Business Contents’.

CERTIFICATE HOLDER:
When a Certificate of Insurance is issued, the certificate holder is being provided “proof of insurance” only, at the time of issuance, and does not afford any coverage.

CERTIFICATE HOLDER vs ADDITIONAL INSURED:
When a Certificate of Insurance is issued, the ‘Certificate Holder’ is being provided “proof of insurance” only, at the time of issuance, and does not afford any coverage. Adding the ‘Certificate Holder’ as an ‘Additional Insured’ to extends your Liability policy to include protection for those added insureds listed on the form. This is needed because your policy does not provide automatic coverage for these individuals/entities. The company may initiate a charge for each Additional Insured added to your policy. Therefore, ‘Certificate Holders’ should only be added as ‘Additional Insureds’ upon the request of the policy holder.

CERTIFICATE OF INSURANCE:
A standardized form, from ACORD, providing “proof of insurance” only, at the time of issuance, and does not afford any coverage.

CERTIFICATE OF INSURANCE, INCLUDING an ADDITIONAL INSURED:
At times, a ‘Certificate Holder’ may require to be listed as an ‘Additional Insured’ on your policy. A Certificate of Insurance is issued, but it lists your client as an Additional Insured in the description. The company may initiate a charge for each Additional Insured added to your policy.

CLAIMS-MADE COVERAGE:
A policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current reporting year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered. (This is an alternative to ‘Occurrence’ Coverage).

COINSURANCE:
A policy may contain a coinsurance clause requiring that the limit of coverage be a minimum percentage (usually 80%) of the insurable value of your property. If the amount of insurance carried is less than what is required by this clause, any claim payment may be reduced by the same percentage as the deficiency. For example, covered property worth $100,000 may require a minimum of 80%, or $80,000, of coverage for compliance with the policy’s coinsurance requirement. If only $60,000 of coverage is carried (25% less than the required $80,000), then any loss payment would be reduced by 25%.

CONSTRUCTION BOND:
This bond guarantees terms and conditions of a construction contract, assuring performance of the contract, including guaranteeing the payment of all labor and material costs. The process of obtaining the bond may be similar to obtaining a line of credit.

CONTRACTUAL LIABILITY:
This coverage is used to insure against bodily injury and property damage claims arising out of the liability of others that you assume in an “insured contract” as defined in the policy.

COMMERCIAL GENERAL LIABILITY (CGL):
Provides Liability coverage for Bodily Injury and Property Damage arising from accidents on premises, business operations in progress, products manufactured or sold, and completed operations. Bodily Injury includes sickness or disease and death in addition to accidental injuries. Property Damage applies only to claims from damage to tangible property or loss of use of tangible property not damaged.

COMPUTER / ELECTRONIC DATA PROCESSING COVERAGE (EDP):
Specialized type of insurance designed to cover computer equipment, data systems, information storage media, and expense or income losses related to EDP losses.

CRIME:
Refers to a very broad category of coverages, revolving around protection against loss due to criminal acts of others. Examples of these coverages include
Employee Dishonesty Coverage, Forgery or Alteration Coverage, & Fidelity Bonds.

DBL:
New York State’s mandated short term disability. It is a required insurance policy that ALL employers must carry for their employees.DBL benefits are equal to 50% of the disabled employee’s average weekly wages (based on the last eight weeks of employment). The maximum benefit is $170/week. Benefits begin on the eighth day of disability. Benefits are payable for a maximum of 26 weeks throughout any period of 52 consecutive weeks. Pregnancies are included.

DIRECTORS AND OFFICERS LIABILITY INSURANCE:
Covers directors and officers of a company for negligent acts or omissions, and for misleading statements that result in suits against the company, often by shareholders. Directors and Officers insurance policies usually contain two coverages: personal coverage for individual directors and officers who are not indemnified by the corporation for their legal expenses or judgments against them – some corporations are not required by their corporate or state charters to provide indemnification and corporate reimbursement coverage for indemnifying directors and officers. Entity coverage for claims made specifically against the company may also be available.

EMPLOYEE BENEFITS LIABILITY:
Provides coverage for acts, errors or omissions committed in the administration of employee benefit plans, including group life insurance, group health insurance, profit sharing plans, unemployment insurance, social security benefits, workers’ compensation and disability benefits.

EMPLOYEE THEFT / DISHONESTY:
This coverage is used to insure against loss of money, securities or other property belonging to you, that is caused by employee dishonesty.

EMPLOYERS LIABILITY:
This coverage will pay for all sums which you are legally obligated to pay because of bodily injury by accident or disease sustained by any employee arising out of their employment. This coverage is distinct from any Workers Compensation policy claim. AGENTS NOTE: Except for states requiring unlimited coverage, the standard policy provides only the basic limit of $100,000 accident and $500,000 aggregate. Recent suits have been successfully based on a variety of grounds from a number of different parties including spouses and children.

EMPLOYMENT PRACTICES LIABILITY:
Liability insurance for employers that covers wrongful termination, discrimination, or sexual harassment toward the insured’s employees or former employees.

EXHIBITION FLOATER:
This policy is used to provide coverage for equipment, stock or other property, while it is publicly exhibited or displayed. Standard Property policies exclude coverage for these exposures.

FIDELITY BOND:
This bond reimburses employers up to the limit of the bond for loss sustained because of dishonest acts of covered employees.

FIDUCIARY BOND:
This form of bond is written for individuals appointed to handle the affairs of others. It guarantees that individuals will faithfully perform their duties while acting within their appointed capacities.

FORGERY OR ALTERATION:
This coverage is used to insure against loss resulting from forgery of checks, drafts, notes or other similar written promises prepared by you or your agent. It does not cover dishonest acts of employees, which must be insured by Employee Dishonesty coverage.

FIRE LEGAL LIABILITY:
Provides Property Damage coverage to property leased or rented to the Insured. If the Insured rents a building and by negligence on the part of the Insured, fire damages the part of the building that is leased by the Insured, Fire Legal Liability coverage limit would apply. Once the fire leaves the area you rent or lease, any subsequent damage would be covered under the Per Occurrence Limit of your policy.

FIRE RESISTIVE:
masonry construction with not less than a two-hour fire-resistance rating.

FRAME:
Frame buildings generally have roof, floor, and supports of combustible material, usually wood, and combustible interior walls.

GARAGE LIABILITY:
This coverage is used to insure against liability claims arising out of your garage operations including the use of automobiles.

GARAGEKEEPERS COVERAGE:
This insurance is used to insure against claims arising out of damage to vehicles owned by others which are left with you for storage, service, safekeeping or repair.

GENERAL AGGREGATE:
The total amount of coverage payable during the policy period, no matter how many separate accidents might occur. This limit applies to all damages paid for bodily injury, property damage, personal injury, advertising injury, and medical expenses, except damages included in the products-completed operations hazard. Thus, the policy will never pay out, in total, over the policy period, more than the General Aggregate Limit. Without a General Aggregate Limit, the policy could be responsible for an unlimited number of claim payments, each one equaling the policy’s Liability limit.

GLASS COVERAGE:
A commercial property form used to eliminate the deductible on glass. Also may purchased by a tenant to cover glass related to their space, but owned by the landlord.

GROSS RECEIPTS:
Total annual sales (do not deduct expenses).

HABITATIONAL:
Any property that contains at least one apartment.

HIRED AUTOMOBILE:
Automobile Liability coverage for operation of an automobile hired by the insured.

HOLD-HARMLESS AGREEMENT:
A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts like leases. A typical lease may provide that the lessee must “hold harmless’ the lessor for any liability from accidents arising out of the premises.

INLAND MARINE:
Property that is mobile in nature has been traditionally handled on these types of policies. A wide variety of forms and coverages have been developed to handle the needs of this property.

INSTALLATION FLOATER:
This policy is used to cover materials and supplies during transit to, or installation at, a covered job site. Coverage ends when the contractor’s or purchaser’s interest ceases, whichever occurs first.

JOISTED MASONRY:
Buildings with exterior walls of masonry or fire-resistive construction rated for not less than one hour and with combustible floors and roofs.

LIQUOR LIABILITY:
Provides coverage for bodily injury and property damage arising out of the selling, serving or furnishing of any alcoholic beverage.

MASONRY / NON-COMBUSTIBLE:
Buildings with exterior walls of masonry — not less than four inches thick, and noncombustible or slow-burning floors and roofs — regardless of the type of insulation on the roof surface.

MIXED-MERC:
(Mixed Mercantile) Any property that contains at least one apartment & one business.

MOTOR TRUCK CARGO – OWNER’S FORM:
This form insures the owner of a truck against loss to his own property while being transported. It pays for the loss or damage of cargo for the perils insured against, regardless of the legal liability.

MOTOR TRUCK CARGO – TRUCKER’S FORM:
This form indemnifies the policyholder, a trucker, for loss or damage resulting from his legal liability as a carrier while transporting the property of others. It does not insure against any loss for which he is not legally liable.

NAMED INSURED:
Any person, firm, or corporation, or any member thereof, specifically designated by name, as an insured in a policy.

NON-COMBUSTIBLE:
Building supports of noncombustible or slow-burning materials.

NON-OWNED AUTOMOBILE LIABILITY:
Automobile Liability coverage for operation of an automobile not owned by the insured. This frequently results when an employee uses his own personal car in the business activities of the insured.

OCCURRENCE:
An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn’t have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.

OCCURRENCE COVERAGE:
A policy providing liability coverage only for injury or loss that occurs during the policy period, regardless of when the claim is actually made. (This is an alternative to ‘Claims-Made’ Coverage).

OCEAN MARINE CARGO COVERAGE:
This policy is used to provide coverage for property you ship overseas.

ORDINANCE OR LAW:
Adds coverage to the property form to provide coverage for increased construction costs associated with compliance with an ordinance or law after a covered loss.

PACKAGE POLICY:
An insurance policy including two or more lines or types of coverages in the same contract. A BOP is a type of Package Policy.

POLICY AUDIT:
An examination of the insured’s payroll and / or sales records by a representative of the insurance company to determine the premium due on an auditable policy.

PERSONAL INJURY:
Injury other than bodily injury arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation of a person’s right to privacy committed other than in the course of advertising, publishing, broadcasting, publishing, or telecasting.

PERSONAL PROPERTY:
Also known as “contents,” this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured’s business.

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

PREMISES MEDICAL PAYMENTS:
Provides Medical Payments for persons, other than the Named Insureds, for Bodily Injury suffered on the premises, even though the Insured was not negligent. The difference between Medical Payments and Premises Liability is negligence. You do not need to be held negligent for the insurance company to pay a medical payment claim. This allows the company to pay small nuisance claims without the need for costly legal expenses.

PREMISES AND OPERATIONS:
The Premises hazard exists when there is ownership or occupancy of property (the premises). A customer may have a premises claim against the Insured if the newly waxed floors caused the customer to slip and fall. The Operations hazard exists when activity in addition to occupancy of property exists. Most of our customers have this exposure rather than Premises. A carpenter may be negligent and cut the electrical wiring, causing Property Damage to the building.

PRODUCTS AND COMPLETED OPERATIONS:
Products hazard arises from the manufacturing or selling of a product such as an air conditioner. A compressor that our Insured sold and installed for the client may have been defective and caused a fire damaging the building. Completed Operations is a hazard that remains after the contractor has completed the job. In the air conditioner example above, if the compressor was improperly installed and later caused fire damage due to the improper installation, any resulting injuries or Property Damage would be said to emanate from the Completed Operations hazard.

PRODUCTS AND COMPLETED OPERATIONS AGGREGATE:
The total amount of coverage payable during the policy period, no matter how many separate accidents might occur. This limit applies to all damages paid for bodily injury, property damage, personal injury, advertising injury, and medical expenses, included in the products-completed operations hazard. Thus, the policy will never pay out, in total, over the policy period, more than the Products and Completed Operations Aggregate Limit. Without a Products and Completed Operations Aggregate Limit, the policy could be responsible for an unlimited number of claim payments, each one equaling the policy’s Liability limit.

PRODUCT RECALL & REPLACEMENT:
Provides coverage for errors in design and manufacture of products. May apply to costs of media notices, shipping and disposal of recalled products and distribution of replacement products.

PROFESSIONAL LIABILITY INSURANCE:
Liability insurance to indemnify professionals, doctors, lawyers, architects, etc. for the loss or expense resulting from claim on account of bodily injuries because of any malpractice, error or mistake committed or alleged to have been committed by the insured in his profession.

PROPERTY:
May include Buildings, Contents, Tools, Equipment, Computers, Food, perishables.

REAL PROPERTY:
Permanent structures at the premises described in the Declarations, including permanently installed machinery and equipment. Also referred to as ‘Building’.

REPLACEMENT COST:
The dollar amount needed to replace damaged property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

RETROACTIVE DATE:
This date is used to specify, in a Claims-Made policy, the extent of coverage that is available for claims that occur prior to the inception of the policy in effect at the time such claims are made. If a claim is made for damage that occurred before the retroactive date, the policy will not respond, even though all other requirements of the policy have been met.

SALESMENS SAMPLES COVERAGE:
This policy is used to insure against loss of samples or catalogs while in the custody of your sales representatives or principals when they are acting in the scope of their job description.

SEASONAL INCREASE:
Provides coverage for increased Business Personal Property loss due to the seasonality of the business.

SELF INSURED RETENTION:
This is the part of a claim that must be retained by you before your umbrella/excess policy is activated. It is similar to a deductible clause.

SPECIAL EVENTS:
Liability coverage for a single event, such as a Party, Parade, or any other specific event

SPECIAL PERILS COVERAGE:
This coverage will protect covered property against direct loss arising from any cause not specifically excluded. The advantage of form is that your insurance company must prove that a loss is specifically excluded in order to deny coverage under the policy.

SPOILAGE COVERAGE:
Provides coverage for loss or damage from breakdown, contamination, or power outage to perishable stock whether owned or in the insured’s care, custody or control.

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

SUBROGATION WAIVER:
A waiver by the named insured giving up any right of recovery against another party. Normally an insurance policy requires that subrogation (recovery) rights be preserved.

SURETY BOND:
A bond in which the surety agrees to answer to the obligee for the non-performance of the principal (known as the obligor).

TOOLS AND EQUIPMENT FLOATER:
This policy is designed to cover your tools and mobile equipment, while it is stored on premises, in transit or at temporary locations or jobsites.

TRANSIT INSURANCE:
A specialized form of Inland Marine coverage providing protection for property while in transit. Such property can include coverage for an owner’s property or property of others in the care, custody or control of a carrier.

UMBRELLA POLICY:
Coverage for losses above the limit of an underlying policy or policies such as commercial general liability and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

VALUABLE PAPERS & RECORDS:
Coverage for the cost of reproduction of valuable papers and records, including, contracts, books, deeds, drawings, or maps.

WORKERS COMPENSATION:
State law requires that every employer provide Workers Compensation insurance for their employees. This insurance provides coverage for accidents or disease arising from employment as prescribed by these state laws. Benefits can include lost wages, medical expenses, and permanent disfigurement/disability payments.

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Chadrick Hamilton, ext. 124

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