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Glossary A-G

A

ABANDONMENT
Giving up the proprietary rights in insured property to the Underwriter in exchange for payment of a constructive total loss.

ACCIDENT
An unexpected fortuitous event, unforeseen and unintended, not under the control of an insured and resulting in a loss.

ACCIDENT FREQUENCY
The number of times an accident occurs. Used in predicting losses upon which premiums are based.

ACCIDENT INSURANCE
A form of health insurance against loss by bodily injury.

ACCIDENTAL DEATH
Coverage in the event of death due to an accident, usually in combination with dismemberment    insurance.

ACCOUNTS RECEIVABLE POLICY
An inland marine (also burglary) policy written to protect the insured from financial loss due to his inability to collect amounts owed him because of the destruction of his records.

ACT OF GOD
A flood, an earthquake or other accident or event that is without any human intervention and that could not have been prevented by reasonable care or foresight, but is the result of natural causes (A snowstorm is an Act of God; driving in one is an act of man).

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.

ACTUAL TOTAL LOSS
Occurs when: (1) the insured property is completely destroyed or (2) the Assured is irretrievably deprived of the insured property or (3) cargo changes in character so that it is no longer the thing that was insured or (4) a ship is posted “missing” at Lloyd’s, in which case both the ship and its cargo are deemed to be an actual total loss.

ACTUARY
A professional trained in the mathematics of insurance and risk management.

ADD-ONS
Additional coverages to your basic policy.

ADDITIONAL INSURED
A person or firm or corporation other than the named insured on a policy or mortgage company named in a mortgagee clause, who is protected against loss by the terms of the policy or mortgage company named in the mortgage clause.

ADJUSTER
An individual representing the insurance company and acting for the company in working on agreements as to the amount of a loss and the liability of the company in same.

ADVERSE SELECTION
Selection against the insurance company; the tendency of more poor risks to buy and maintain insurance than good risks.

AGENTS
Two types of agents sell insurance: (1) Independent Agents are self-employed business people who typically represent more than one insurance company and are paid on a commission basis; and (2) Exclusive Agents represent only one insurance company and may be salaried or work on a commission basis.

ALL RISK
Insurance against loss or damage to property arising from any fortuitous cause, except such as may be specifically excluded.

ANNUITY
A life insurance company contract that pays a periodic income benefit for a specified period of time.

APPLICATION
A signed statement by a prospective insured client which becomes a part of the insurance contract.

APPRAISAL
A survey of property made for determining its insurable value or the amount of loss sustained.

ASSIGNMENT
The passing of beneficial rights from one party to another.

ASSIGNED RISK
A risk which underwriters do not care to insure, but because of state law or otherwise, the insured must be protected and the insurance is therefore handled through the state and assigned to companies.

ASSUMED LIABILITY
Liability which would not rest upon a person except that he has accepted responsibility by contract expressed or implied. This is also known as contractual liability.

AUTOMOBILE INSURANCE PREMIUM DISCOUNTS
A discount offered to drivers for such safeguards as air bags, seat belts, good driving record, anti-theft devices, multiple vehicles, etc.

AUTOMOBILE FLEET POLICY
A commercial automobile policy covering five or more automobiles.

AVERAGE
A marine partial loss. This can be particular average or general average (see below).

AVERAGE CLAUSE
A clause in a marine insurance policy, whereby partial losses are subject to special conditions (e.g. a franchise or deductible is to be applied to claims).

B

BAILEE
A person or concern having possession of property committed in trust from the owner.

BAILEE’S CUSTOMERS POLICY
A policy providing for loss or or damages to property of bailee’s customers, payable either to bailees for their account or direct to customers.

BASIC COVERAGE FORM
Any of the commercial or personal insurance property forms which provide basic coverages. These forms generally provide the most limited coverage, which is surpassed by “Broad Forms” and “Special Forms.”

BASIC RATE
The manual rate, from which are taken discounts or to which are added charges to compensate for the individual circumstances of the risk.

BENEFICIARY
Designation by the owner of a life insurance policy indicating to whom the proceeds are to be paid upon the insured’s death or when an endowment matures.

BENEFIT OF INSURANCE CLAUSE
A clause by which the bailee of goods claims the benefit of any insurance policy effected by the cargo owner on the goods in care of the bailee. Such a clause in a contract of carriage, issued in accordance with the Carriage of Goods by Sea Act, is void at law.

BILL OF LADING
Contract of carriage and receipt for goods, issued by carrier.

BINDER
(Or Binding Receipt): In lines other than life and health, a binder is an acknowledgement (usually from the agent) that insurance applied for is in force whether or not premium settlement has yet been made or the policy issued. In life and health insurance, binders are not issued, but if premium settlement is made with the application, what is often erroneously referred to as a “binder” is issued. Actually this is a conditional binding receipt.

BLANKET INSURANCE
(1) Property-liability insurance that covers more than one type of property in one location in one policy or form instead of under separate items, or one or more types of property at more than one location; (2) A contract of health insurance that covers all of a class of persons not individually identified.

BODILY INJURY LIABILITY
The liability which may arise from injury or death of another person.

BOILER AND MACHINERY POLICY
Insurance against loss due to accidents to boilers, pressure vessels or other machinery including the equipment itself, as well as liability arising out of the accident.

BOND
An obligation of the insurance company to protect one against financial loss caused by acts of another.

BUILDER’S RISK COVERAGE FORM
A commercial property coverage form specifically designed for buildings in the course of construction.

BUILDER’S RISK INSURANCE
Insurance against loss to buildings or structures in the course of construction.

BUILDINGS AND PERSONAL PROPERTY COVERAGE FORM
A commercial property coverage form designed to insure most types of commercial property (buildings or contents or both). It is the most frequently used commercial property form, and has replaced the General Property Form, Special Building Form, Special Personal Property Form, and others.

BUSINESS AUTO COVERAGE FORM
The latest commercial Automobile Insurance coverage form, which may be written as a monoline policy or as part of a commercial package. This form has largely replaced the Business Auto Policy.

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

BUSINESS INTERRUPTION INSURANCE
A type of policy that pays for loss of earnings when operations are curtailed or suspended because of property loss.

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

BUSINESS 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.

C

C & F
A sale term relating to goods. Cost and Freight. The consignee makes his own insurance arrangements for the goods throughout the period of transit.

CANCELABLE POLICY
A policy which may be terminated by the company or the insured by proper notification sent to the other party according to terms set forth in the policy.

CARRIER
(1) An insurance company which “carries” the insurance. (The terms “insurance company” or “insurer” are preferred because of the possible confusion of “carrier” with transportation terminology).

(2) In transportation, the trucker, air carrier, ocean steamship company or other entity which moves the goods. (See “Contract Carrier)

CASH SURRENDER VALUE
Money the policyholder is entitled to receive from the insurance company upon surrendering a life insurance policy containing a cash value clause.

CASUALTY INSURANCE
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed for such injury or for damage to property of others. It also includes such diverse forms as Plate Glass, insurance against crime, such as robbery, burglary or forgery, Boiler and Machinery insurance, and Aviation insurance. Many casualty companies also write surety business.

CAUSES OF LOSS
Under the latest commercial property forms, this term replaces the earlier term “perils” insured against.

CLAIM
(1) A formal request for payment of a loss under an insurance contract or bond; (2) The actual amount of the final settlement.

CLAIMANT
One who seeks reimbursement for loss under the terms and conditions of the insurance contract.

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. (Contrast this with “Occurrence Coverage)

CLASSIFICATION CLAUSE (CARGO)
A clause in a cargo insurance open cover which details the minimum classification for an overseas carrying vessel that is acceptable to the insurers for carriage of the insured goods at the premium rate/s agreed in the contract. Goods carried by lower class vessels are accepted under the open cover, subject to payment of an additional premium.

CLAUSE
A section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage.

COBRA (Consolidated Omnibus Budget Reconciliation Act)
A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs, voluntarily or otherwise, and their dependents; gives individuals and their dependent families the right to continue their health care coverage for as long as 18 months.

COINSURANCE
(1) In property insurance, a clause under which the insured shares in losses to the extent that he is underinsured at the time of loss. (2) In health insurance, a provision that the insured and insurance company will shared covered losses in agreed proportion. In health insurance, the preferred term is “percentage participation.”

COLLISION COVERAGE
Physical damage protection for the insured’s own automobile(s) for damage resulting from a collision with another object or upset.

COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE PART
General liability coverage which may be written as a monoline policy or part of a commercial package. “CGL” now means commercial general liability forms which have replaced the earlier “comprehensive” general liability forms. The latest forms include all sublines, provide very broad coverage, and two variations are available, “Occurrence,” and “Claims Made,” coverage.

COMPREHENSIVE COVERAGE
Traditional name for physical damage coverage for losses by fire, theft, vandalism, falling objects and various other perils. On Personal Auto Policies this is now called “other than collision” coverage. On commercial forms, it continues to be called “comprehensive coverage.”

CONDITIONALLY RENEWABLE
A contract of health insurance that provides that the insured may renew the contract to a stated date or an advanced age, subject to the right of the insurance company to decline renewal only under conditions defined in the contract.

CONSEQUENTIAL LOSS
A loss arising indirectly from an insured peril.

CONSTRUCTIVE TOTAL LOSS
A partial loss of sufficient degree to make the cost of repairing as much or more than the property is worth or is insured for.

CONTRACT CARRIER
A transportation company which carries the goods of only certain customers and not the public in general as in the case of a common carrier.

CONTRACTUAL LIABILITY
Liability assumed under any contract or agreement. Coverage is generally limited in liability policies, but in most cases may be provided for an additional premium.

CONTRIBUTION
The term relates to circumstances where more than one party covers the risk. Each party is deemed to be liable for his proportion of the loss. If the Assured recovers in full from one insurer, that insurer is entitled to recover from the other insurer for that part of the loss which should have been paid by the latter. The term is used in marine insurance, also, in relation to contributions paid by the Assured in connection with salvage and/or general average.

CONTRIBUTORY VALUE
The value on which a contribution to a general average loss or salvage award is calculated.

CONVERSION PRIVILEGE
A right granted to group certificate holders, by which they may obtain an individual policy (upon leaving the group) regardless of physical condition.

COPAYMENT
The portion, either a percentage or a fixed dollar amount, of a medical bill that a patient pays. The insurer pays the rest.

COUNTRY DAMAGE
Marine term referring to damage to baled or bagged goods (e.g. cotton) caused by excessive moisture from damp ground or exposure to weather, or by grit, dust or sand forced into the insured property by windstorm or inclement weather.

COVER
(1) A contract of insurance; (2) To effect insurance; (3) To include within the coverage of a contract  of  insurance.

COVERAGE
The scope of protection provided under the contract of insurance.

COVERAGE TRIGGER
A mechanism that determines whether a policy covers a particular claim for loss. For example, the difference between the coverage triggers of liability “occurrence” forms and “claims made” forms is that the loss must occur during the policy period in the first case and the claim must be made during the policy period in the second case.

D

DECLARATION PAGE
That page of the insurance policy which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage, and the actual coverages given in the contract, including the locations and amounts.

DEDUCTIBLE
The amount of loss paid by the policyholder before the insurance policy benefits become payable.

DENTAL INSURANCE
Coverage for dental services under a group of individual policy.

DEPRECIATION
Decrease in the value of any type of tangible property over a period of time resulting from use, wear, tear, deterioration, and obsolescence.

DIRECT OR HELD COVERED
A condition requiring that the insured voyage be direct from one place to another. If the voyage is delayed en route or there is a deviation from the direct route the insurance cover continues subject to payment of an additional premium, but only if the Assured gives prompt notice of such delay or deviation immediately on receipt of advices, unless the policy provides otherwise.

DISABILITY
A condition that curtails to some degree a person’s ability to carry on his normal pursuits. A disability may be partial or total, and temporary or permanent.

DISABILITY INSURANCE
A type of health insurance that pays a monthly income to the policyholder when he or she is unable to work because of illness or accident.

DISCLOSURE
The duty of the Assured and his broker to tell the Underwriter every material circumstance before acceptance of the risk.

DISCOVERY PERIOD
The time allowed the insured after termination of certain bond and policy provisions to discover that he has sustained a loss which occurred during the period covered by the contract.

DUTY OF ASSURED CLAUSE
This appears in the Institute Cargo Clauses published for use with the MAR form of policy. It directs the attention of the Assured, his agents, etc. to the duty (as required by the MIA, 1906) to take reasonable measures to avert or minimize any loss which is recoverable under the policy; also to ensure that all rights against carriers and others are properly preserved and exercised. Underwriters agree to reimburse the Assured for any reasonable expenditure incurred by his compliance with the clause; in practice, these expenses are termed “sue and labor” charges (see Sue & Labor).

E

EARNED PREMIUM
That portion of a premium for which the policy protection has already been given during the now-­‐expired portion of the policy term.

EFFECTIVE DATE
The date on which an insurance policy or bond goes into effect, and from which protection  is  furnished.

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.

ELIMINATION PERIOD
A loosely-used term sometimes designating the waiting period and sometimes the  probationary  period.

EMPLOYERS LIABILITY INSURANCE
Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by workers compensation law.

EMPLOYERS NON-OWNERSHIP AUTOMOBILE LIABILITY
(1) Liability arising out of the 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; (2) Insurance coverage for the liability exposure mentioned above.

ENDORSEMENT
A form attached to the policy bearing the language necessary to change the terms of the policy to fit special circumstances.

EVIDENCE OF INSURABILITY
Any statement of a person’s physical condition, occupation, etc., affecting his acceptance for insurance.

EXCLUSIONS
Specified hazards for which a policy will not provide benefit payments. (Often called Exceptions)

EXPERIENCE
The loss record of an insured, class of coverage, or of an insurance company.

EXPERIENCE RATING
Determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk’s own past claim experience.

EXPOSURE
(1) State of being subject to the possibility of loss; (2) extent of risk as measured by payroll, gate receipts, area, or otherwise; (3) possibility of loss to a risk being caused by its surroundings.

EXTENDED COVERAGE ENDORSEMENT
A specific endorsement attached to a Standard Fire policy, usually providing coverage of windstorm, hail, explosion, riot, riot attending civil strike, aircraft, vehicular damage, smoke and civil commotion.

EXTENDED REPORTING PERIOD (ERP)
A period allowed for making claims after expiration of a “claims made” liability policy. Also known as a “tail.”

F

FAS
Incoterm meaning Free Alongside Ship” FAC: Incoterm meaning “Free Carrier”    FOB: Incoterm meaning “Free On Board”

FPA
Free of Particular Average (see Average or Particular Average)

FIDELITY BOND
A bond which will reimburse an employer for loss up to the amount of the bond, sustained by an employer (the insured) by reason of any dishonest act of an employee (or employees) covered by the bond.

FIRE
Combustion sufficient to product a spark, flame or glow and which is hostile (as opposed to friendly -­‐  i.e. not in the place where it is intended to be as in a furnace or fireplace.)

FIRE INSURANCE
(1) Insurance contracts that indemnify an insured for loss caused by the destruction of the insured’s property resulting from a fire; (2) The field of insurance that provides insurance policies on the insured’s property for a variety of perils, including fire.

FIRST NAMED INSURED
The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the “first” named insured rather than requiring notice to all named insureds.

FLAT CANCELLATION
Cancellation of an insurance policy as of the date of its start with no premium charge.

FLOATER POLICY
A policy under the terms of which protection follows moveable property, covering it wherever it may be.

FRANCHISE
A provision in freight insurance conditions which exempts the insurer from particular average losses, in any one accident, under 3%. The provision is waived if the loss is caused by fire, or by the ship stranding, sinking or being in collision.

FREIGHT
(1) Goods moved for another or, (2) The remuneration earned by a shipowner or manager for the carriage of goods; including the profit derived from carrying his own goods.

G

GARAGEKEEPERS LEGAL LIABILITY POLICY
Coverage for losses for which the insured is legally liable, caused by fire or explosion, theft of an entire vehicle, riot and vandalism, collision, and upset to automobiles in his care, custody and control.

GARAGE LIABILITY POLICY
A liability contract designed to provide the owner of a garage operation with the liability protection needed for the special hazards that exist there.

GENERAL AGGREGATE LIMIT
A Commercial General Liability limit that 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.

GENERAL AVERAGE
An Ocean Marine coverage meaning a partial loss which has resulted from the voluntary and deliberate sacrifice of some cargo for the benefit of all concerned, and which must be shared by all parties (owners of ship, cargo and freight) in proportion to their interest. For example, if 100 containers were jettisoned from a 1000 container load in order to protect the ship, the owners of the remaining 900 containers, the owners of the ship, and the owners of the freight would all contribute to offset the losses of those whose cargo was jettisoned for the benefit of the whole.

GENERAL AVERAGE CONTRIBUTION
The proportion paid or payable by a saved interest involved in a general  average  act.

GENERAL AVERAGE DEPOSIT
Paid by a consignee to obtain release of the cargo from the carrier following a general average act. This may be replaced by an Underwriter’s guarantee.

GENERAL AVERAGE GUARANTEE
Paid by a consignee to obtain release of the cargo from the carrier following a general average act. This may be replaced by an Underwriter’s guarantee.

GENERAL AVERAGE IN FULL aka G-A IN FULL
An agreement in a cargo insurance whereby Underwriters do not reduce a claim for general average contribution in event of under insurance.

GENERAL EXCLUSION CLAUSE
A clause in the Institute Cargo Clauses 1982, which specifies risks that are excluded, irrespective of the risks covered elsewhere in the wording.

GLASS COVERAGE FORM
A commercial property form used to insure plate glass, lettering, frames and ornamentation. It has replaced earlier commercial glass insurance forms.

GOOD FAITH
A basic principle of insurance. The Assured and his broker must disclose and truly represent every material circumstance to the Underwriter before acceptance of the risk. A breach of good faith entitles the Underwriter to avoid the contract. (Proposed changes in law may affect this definition – also see “Utmost Good Faith”.)

GUARANTEED RENEWABLE POLICY
A policy which the insured has the right to continue in force by the timely payment of premiums to a specified age, (usually age 50) during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force but make changes in premium rates for the entire policyholder classification. (See also “Non-Cancelable Policy”.)