Glossary
Select the starting alphabet of the term you are looking for from the list below:
Act Of God
An unpreventable accident or event that is the result of natural causes; for example, floods, earthquakes, or lightning.
Actual Total Loss
This term refers to situations in marine insurance where -
- (a) the subject matter of the insurance is destroyed;
- (b) the subject matter of the insurance is so damaged as to be no longer be capable of still being described as the thing insured; or
- (c) the insured is deprived of the subject matter of the insurance forever.
Adjustment Premium
An additional or return premium that is payable in relation to a deposit premium depending on the insurance contract.
Agents
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission.
Agreed Value Policy
An insurance contract under which the insurer agrees to pay the insured a stated amount in the event of the total loss of the property insured without any adjustment for depreciation or appreciation.
All risks
A property insurance which covers any accidental loss or damage that is not specifically excluded under the policy.
Appreciation
In the context of property insurance an increase in value of the property insured.
Arbitration
Procedure in which an insurance company and the insured or a vendor agrees to settle a claim dispute by accepting a decision made by a third party.
Assets
Property owned, including stocks, bonds and real estate.
Assured
Another name for an insured.
Average
If the sum insured under non-marine insurance is expressed to be “subject to average” and that sum is less than the value of the subject matter of the insurance then any claim that is agreed under the policy will be reduced proportionately to reflect the under insurance.
In Marine Insurance the term Average may also refer to one of two types of loss, General Average and Particular Average.
Aviation Insurance
Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.
Bailee
A person who holds the property of another person (the bailer) under a contract or agreement according to which the property held is to be returned to the bailer or delivered somewhere to his order. A bailee for reward is paid for his services.
Beneficiary
The person or party named by the owner of a life insurance policy to receive the policy benefit.
Boiler Insurance
Commercial insurance that covers damage caused by the malfunction or breakdown of boilers.
Broker
An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance.
Burglary And Theft Insurance
Insurance for the loss of property due to burglary, robbery or larceny.
Business Interruption Insurance
Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. It also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises.
Buy back
In the context of general insurance this refers to the purchase of cover in respect of an otherwise excluded peril by means of the payment of additional premium.
Cancellation Clause
A clause in an insurance contract which permits an insurer and/or an insured to cancel the contract before it is due to expire. The clause may provide for a return of premium in respect of the unused portion of the policy.
Casualty
Liability or loss resulting from an accident.
Casualty Insurance
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured 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 and forgery, boiler and machinery insurance and Aviation insurance.
Catastrophic Risk
The risk of a large loss by reason of the occurrence of a peril to which a very large number of insured are subject
Claim
A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy
Claimant
The person making a claim.
Common Carrier
A business or agency that is available to the public for transportation of persons, goods or messages. Common carriers include trucking companies, bus lines and airlines.
Commercial Lines
Products designed for and bought by businesses. Among the major coverage's are Boiler and Machinery, Business Income, Commercial Motor, Public Liability, Directors and Officers Liability, Fire and allied perils, Inland Marine, Medical Malpractice Liability, Product Liability, Professional Liability, Fidelity Guarantee and Workmen's Compensation.
Commission
Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.
Comprehensive Insurance
Motor insurance coverage providing protection in the event of physical damage to the insured car.
Compulsory Auto Insurance
The minimum amount of motor liability insurance that meets a state law.
Declaration
Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information.
Deductible
The amount of loss paid by the policyholder. Either a specified monitory amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
Depreciation
The decrease in the value of an item due to age, use or wear and tear. Such devaluation is not covered under a contract of indemnity. However an insurermay agree to provide cover on “a new for old” basis which represents a modification of the principle of indemnity and avoids the need to determine rates and amounts of deprecation when settling claims.
Directors & Officers Liability Insurance/D&O
Directors and officers liability insurance (D&O) covers directors and officers of a company for negligent acts or omissions and for misleading statements that result in suits against the company.
Disability
In disability insurance, the inability of an insured person to work due to an injury or sickness. Each disability policy has a definition of disability that must be satisfied in order for the insured to receive the policy's benefits.
Disaster
A natural or man-made event that negatively affects life, property, livelihood or industry often results in permanent changes to human societies, ecosystems and the environment.
Duty of disclosure
The duty of every person seeking insurance to inform the insurer from whom a quotation for insurance is sought of every material fact. The duty arises when seeking new insurance, when seeking a variation of cover and at renewal.
Should a person seeking insurance fail to disclose a material fact then this may lead to the avoidance of the relevant insurance by the underwriter.
Employer's Liability
Policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law.
Endorsement
A written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Sometimes called a rider.
Errors And Omissions Coverage / E&O
A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
Excess
The amount or proportion of loss arising under an insurance contract that the insured must bear. If the loss is less than the amount of the excess then the insured must meet the cost of it
Excesses may either be compulsory or voluntary. An insured which accepts an increased excess in the form of a voluntary excess receives a reduction in premium.
Exclusion
A provision in an insurance policy that eliminates coverage for certain risks, people, property classes or locations.
Items or conditions that are not covered by the general insurance contract.
Fidelity Insurance
A type of insurance which is designed to protect a firm from losses caused by the dishonest acts of its employees.
Fire Insurance
Coverage protecting property against losses caused by a fire or lightning
Grace period
For insurance premium payments, a specified length of time following a premium due date within which the renewal premium may be paid without penalty.
Group Insurance
A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
Hazard
Something that causes an exposure to injury, loss or damage.
Inland Marine Insurance
This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication.
Insurable interest
If an insured wishes to enforce a contract of insurance before the Courts he must have an insurable interest in the subject matter of the insurance, which is to say that he stands to benefit from its preservation and will suffer from its loss.
Without the presence of insurable interest, an insurance contract is not formed for a lawful purpose and, thus, is not a valid contract.
In non-marine insurances, the insured must have insurable interest when the policy is taken out and also at the date of loss giving rise to a claim under the policy. In life insurance the insured must have insurable interest when the policy is taken out and in marine insurance the insured must generally have insurable interest at the date of loss giving rise to a claim under the policy .
Insurable risk
Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable.
Insurance
- (1) A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
- (2) A contract whereby an insurer promises to pay the insured a sum of money or some other benefit upon the happening of one or more uncertain events in exchange for the payment of a premium. There must be uncertainty as to whether the relevant event(s) may happen at all or, if they will occur (e.g. death( as to their timing.
Insured
A person who is insured under a contract of insurance. Where there is one insured this person may also be referred to as the policyholder.
Insurer
A provider of insurance - an insurance company
Insured Peril
A harmful event which is covered under a contract of insurance.
Jeweler's Block Policy
A form of property insurance that is provided to jewelers.
Jurisdiction Clause
A clause in an insurance contract which states to which territory's courts any contractual dispute shall be referred for resolution.
Liability insurance
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
An insurance which covers the insured against third party claims or, in the case of employer's liability insurance, claims by employees, subject to specified terms and conditions.
Limits
Maximum amount of insurance that can be paid for a covered loss.
Loss
A reduction in the quality or value of a property, or a legal liability.
Loss adjustment expenses
The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.
Loss costs
The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
Loss of use
A provision that reimburses policyholders for any extra expenses due to having to use some other premises / items while their premises / equipment is being restored following a disaster.
Loss Adjuster
A person who is appointed to investigate the circumstances of a claim under an insurance policy and to advise on the amount that is payable to the policyholder in order to settle that claim. Loss adjusters are generally appointed by underwriters but sometimes policyholders appoint their own loss adjusters to negotiate claims on their behalf.
Malpractice insurance
Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.
Marine insurance
Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ship's hull and cargo and perils include collision, sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo to save other property. Wear and tear, dampness, mold, and war are not included.
Material Fact
Any fact which would influence the judgment of a prudent underwriter in deciding whether to accept an insurance risk and the terms on which he would be willing to grant cover.
Misrepresentation
A false or misleading statement. (1) In insurance sales, a false or misleading statement made by a sales agent to induce a customer to purchase insurance is a prohibited sales practice. (2) In insurance underwriting, a false or misleading statement by an insurance applicant may provide a basis for the insurer to avoid the policy.
Moral hazard
The possibility that a person may act dishonestly in an insurance transaction.
Those personal characteristics of a prospective insured that may increase the probability or size of an insurance loss.
Multi Peril Insurance
Personal and business property insurance that combines in one policy several types of property insurance covering numerous perils.
Named peril
Peril specifically mentioned as covered in an insurance policy.
Package policy
A single insurance policy that combines several coverage previously sold separately. Examples include Householders' insurance and commercial multiple peril insurance
Peril
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded
Personal Accident Insurance
A type of insurance which provides for the payment of specified sums in the event that the insured suffers some bodily injury as a result of an accident.
Personal lines
Property/casualty insurance products that are designed for and bought by individuals
Pollution insurance
Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires
Premises
The particular location of the property or a portion of it as designated in an insurance policy.
Premium
The price of an insurance policy, typically charged annually
Product Liability
A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. Under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.
Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.
Professional Liability Insurance
Covers professionals for negligence and errors or omissions that injure their clients.
Proof of loss
Documents showing the insurance company that a loss occurred.
Property/casualty insurance
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property.
Proposal Form
A standard form which is prepared by an insurer and contains a number of questions which a person seeking insurance is required to answer for the purpose of enabling the insurer to decide whether or not it is willing to grant cover and, if so, the terms on such cover.
Proposer
A person who seeks insurance (frequently by means of completing a proposal form).
Proximate Cause
An insurer will only be liable to pay a claim under an insurance contract if the loss that gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to a peril covered by the policy
Quotation
A statement of the premium that an underwriter requires to underwrite an insurance risk, based on the information supplied by the person seeking cover, either directly or via their broker. A quotation may be conditional, e.g. it may be subject to the provision of further information, or not.
Rate
The cost of a unit of insurance. Rates are based on historical loss experience for similar risks.
Reinstatement
The process by which an insurer puts back into force an insurance policy that has either been terminated or continued as extended term.
Reinsurance
Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. Reinsurers don't pay policyholder claims. Instead, they reimburse insurers for claims paid.
Replacement
Where an insurer agrees to replace irreparably damaged or stolen goods with goods of a similar type and quality under a contract of indemnity instead of paying a cash sum to the insured.
Representation
A statement of fact or expectation. Representations made as to material facts at the time of the negotiation of the placement, amendment or renewal of cover must be true whereas representations as to a matter of expectation must be made in good faith.
Residual disability
Also known as partial disability. In accident insurance, a condition in which the insured is not totally disabled, but is still unable to function as before the sickness or injury, and therefore suffers a reduction in income of at least the percentage as specified in the policy.
Risk
This term may variously refer to -
- (a) the possibility of some event occurring which causes injury or loss;
- (b) the subject-matter of an insurance or reinsurance contract; or
- (c) an insured peril.
Risk Management
Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.
Salvage
Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Salvage charges are the costs associated with recovering that property.
Schedule
A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
Spread of risk
The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood.
Subrogation
The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it.
Subsidence
Movement of the land on which property is situated. A structure built on a hillside may slide down the hill due to earth movement caused by heavy rains.
Sum Insured
The maximum amount that an insurer will pay under a contract of insurance. The expression is usually used in the context of property and life insurance where (subject to the premium cost) the insured determines the amount of cover to be purchased.
Third-party Administrator
Outside group that performs clerical functions for an insurance company.
Third party
Someone other than the insured or his insurer who has suffered injury or loss.
Third Party Liability
The liability that an insured has to a third party.
Total disability
Total disability is usually the complete and continuous inability of an insured to perform the essential duties of his regular occupation.
Total loss
The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
Travel Insurance
Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents.
Uberrima fides
Latin for utmost good faith.
Under insurance
The result of the policyholder's failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy, where the sum insured does not represent the true value of the property insured.
Underwriting
This term refers to:
- (a) The process of evaluating, defining and pricing insurance risks
- (b) The acceptance of the obligation to pay or indemnify the insured under a contract of insurance.
Uninsurable risk
Risks for which it is difficult for someone to get insurance
Utmost Good Faith
Contracts of insurance are contracts of utmost good faith. In the event that either party fails to observe utmost good faith towards the other in regard to the negotiation of cover then the other party may avoid the contract.
The duty of utmost good faith requires each party to inform the other all material facts during the negotiation of the placement, renewal or alteration of cover.
An insured has a separate duty of good faith when making a claim under an insurance policy.
Valued policy
A policy under which the insurer pays a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. Life insurance policies are an example of valued policy.
Voidable Contract
A contract which may be voided at the option of either party. For example, an insurer may avoid a policy from inception for the misrepresentation or non-disclosure of material facts during the negotiation of the placement, renewal or alteration of cover. A insurer may also avoid a policy from the date of the presentation of a fraudulent claim.
Waiting period
For a health insurance policy, the period of time that must pass from the date of policy issue before benefits are payable to an insured.
Warranty
Where insured promises that something will or will not be done during the period of cover or that a particular state of affairs exists or does not exist at the inception of cover.
If the promise is untrue or is not kept then the insurer may disclaim all liability under the policy from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss.
Wear and tear
The amount deducted from a claims payment in recognition of the depreciation of the property insured through usage of it over time.
Workmen's Compensation
Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws govern the amount of benefits paid and other compensation provisions.