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Insurance Term Glossary



Package Insurance: A policy combining two or more lines of insurance which might otherwise have been written as separate policies.


Participating Policy: A policy on which dividends are paid.


Pair or set clause: A provision in many property and inland marine policies that the insurer is not liable for the total value of a set of items if only one item has been lost, damaged or destroyed. The loss settlement is based on the proportion that the lost or damaged part bears to the total value of the set.


Particular Average: In Ocean Marine insurance, a partial loss which is not part of a general sacrifice of property (general average).


Payment Bond: A type of Contract bond which guarantees that bills for labor and materials will be paid to the contractor as they are due. Also called Labor and Materials bond. See Contract bonds.


Peak Season Endorsement: A Commercial Property endorsement which provides for higher limits to apply during specific periods of the year when inventory is at a peak.


Percentage Deductible: A deductible which requires a deduction from the loss of a percentage of the value of the property.


Performance Bonds: Contract bonds which guarantee that jobs will be completed by the contractor according to contract specifications.


Peril: The cause of loss. Examples include fire, windstorm or explosion.


Perils Of The Sea: Unique perils to which property in transit by water is exposed. Includes unusual action of wind or waves, stranding, lightning, collision and sinking.


Personal Articles Floater: Personal Inland Marine insurance which provides all risk coverage on nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.


Personal Effects Floater: Provides all risk coverage for individuals and families who desire to insure their personal belongings (baggage) while traveling or vacationing.


Personal Liability Policy: Provides broad coverage for an individual's or family's liability exposure for bodily injury or property damage. Similar to coverage included in Homeowners contract.


Personal property: Property other than real estate, or property that is movable or separable from real estate; for property insurance purposes, tangible property, which is often called "contents." Personal property may be used for business purposes and therefore may be covered by a commercial policy, while personal property not used for business purposes is generally covered only by personal lines policies (such as homeowners or renters' insurance).


Physical Damage: In auto insurance, damage or loss to the insured's own autos or autos in the insured's care, custody or control.


Physical Hazard: The material, structural or operational features of the property to be insured. It involves the condition or type of property, not the persons owning or managing it.


Physicians and Surgeons Coverage Form: Part of the Commercial Inland Marine Coverage part of the Commercial Package policy. It covers insureds in the medical and dental professions for loss to medical, surgical and dental equipment, furniture, fixtures and improvements or betterments.


Physicians Coverage: A type of Health insurance that reimburses the insured for nonsurgical care provided by a physician.


Policy: An insurance contract.


Policy Period: The period during which the policy contract is in force and affords protection, from inception date to expiration date.


Pollutant: As used in most liability policies written after the mid-1980s, this term refers to any solid, liquid, gaseous or thermal irritant or contaminant, including smog, vapor, soot, fumes, acids, alkalines, chemicals and waste. Waste is further defined as materials to be recycled, reconditioned or reclaimed.


Pollution exclusion: A provision in the Insurance Services Office commercial general liability policy that denies coverage for bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants. Occasionally, portions of this exclusion can be eliminated for an additional premium, or pollution coverage can be purchased in a separate policy. Prior to the 1986 CGL form, coverage was provided for pollution arising out of a sudden and accidental event.


Position Schedule Coverage: A form of Employee Dishonesty insurance which covers only people who fill positions named in the policy.


Premises: The particular location of property as designated in the policy.


Premises Burglary Coverage Form: One of the Commercial Crime Coverage forms which are a part of the Commercial Package policy. Provides coverage for property other than money and securities if caused by burglary or attempted burglary or robbery of a watchperson.


Premises Theft and Robbery Outside The Premises Coverage: One of the Commercial Crime Coverage forms which are a part of the Commercial Package policy. Covers property other than money and securities against any act of stealing from within the premises and robbery outside the premises.


Premium: The consideration (price) paid by the insured to the insurer for insurance protection over a specified period.


Premium Finance: Allows the insured to pay part of the premium when coverage takes effect and pay the rest during the policy period through arranged payments.


Preservation of Property: This is a property insurance coverage, sometimes known as a removal, which provides coverage for property that has been removed from the premises to protect it following a covered loss.


Primary Insurance: When two or more coverages or policies apply to the same loss, the one which pays first, up to its limit of liability or the amount of the loss, whichever is less. See excess insurance.


Principal: In bonds, the party who promises to do (or not to do) a specific thing.


Pro Rata Cancellation: Calculation of the premium charge for a cancelled policy based upon the exact time the protection had been in force.


Producer: A term commonly applied to agent, solicitor, or other person who sells insurance, producing business for the insurer.


Products and Completed Operations: A form of insurance which covers a company against liability arising out of its products or its completed operations. Included in CGL forms or may be purchased separately.


Professional Liability: Liability arising out of the rendering or failure to render services of a professional nature.


Proof Of Loss: (1) The evidence offered by the insured to prove entitlement to collect the amount claimed from the insurer. (2) The statement, signed and sworn by the insured, setting forth the claim information required by the policy.


Property Damage: A type of loss covered under many liability contracts. Property damage means physical injury to tangible property, including loss of use.


Property insurance: Coverage for real or personal property lost or damaged by a covered peril and, sometimes, consequential financial losses resulting from property damage. It is first-party coverage.


Proposal: A written presentation to a prospect indicating various coverages, options, and may also include premiums.


Prospect: The person or entity for whom the agent is trying to provide insurance coverage.


Protected Risk: A risk located in an area served by a fire department.


Protection: 1) A term denoting the insurance provided under a policy. 2) A term indicating the existence of fire fighting facilities in the area which the risk is located.


Protection And Indemnity: In Ocean Marine insurance, a form of liability insurance.


Proximate cause: An act, event or omission that naturally and foreseeably results in a harm or loss, though it may not necessarily be the nearest or last cause; something that produces a harmful effect in a natural chain of causation unbroken by any intervening efficient cause.


Public Official Bonds: A category of Surety bonds furnished by principals who are elected or appointed to fill positions of trust, guaranteeing their faithful and honest performance in office.


Punitive Damages: Damages that punish the wrongdoer for antisocial actions, rather than compensating for loss.


Pure Risk: Uncertainty whether a loss will occur. Only pure risks are insurable.


Rate: The cost of a given unit of insurance. Often the price per $100 or $1,000 of insurance. Can also be a percentage.


Rebate: The unlawful practice of returning a part of a premium to an insured.


Reciprocal Exchange: A form of insurance carrier made up of entities (subscribers) who pool their assets and liabilities under the management of an attorney-in-fact.


Release: An instrument which provides evidence of the discharge of a claim or the abandonment of one's right to claim against another.


Renewal: The continuation of coverage for another period after a policy has expired.


Replacement Cost: The cost to replace a damaged or destroyed item of property, without deducting depreciation. May be the basis of reimbursement for loss to buildings, or by endorsement, to personal property.


Replacement Cost Endorsement: An endorsement that can be added to an HO-3 form to provide replacement cost coverage on personal property (with limitations).


Reporting Form: A method of collecting premiums for exposures which are difficult to evaluate "before the fact." Instead of paying a flat premium, the insured pays a deposit, then submits periodic reports to the insurer, showing the status of the factors on which premium is based. From these status reports, premiums are calculated and charged against the deposit.


Representation: Statements an applicant for insurance believes to be true. Does not carry as much force as warranty.


Residual Market: An organization created by the Legislature to provide Florida residents with crucial or required coverages generally unavailable in the voluntary market.


Retroactive Date: A date stated in the Declarations of a CGL Coverage form which is normally the same date as the date of the issuing company's first claims-made policy for the insured. No coverage is provided under the claims-made form for bodily injury or property damage that occurs prior to the retroactive date.


Return Premium: The amount due the insured if a policy is cancelled, its amount reduced or its rate reduced.


Rider: Another word for endorsement.


Riot: A general disturbance or a public assembly of a group of people who commit acts of violence or threaten violence. Riot is an insurable peril under most basic property insurance policies and is substantially the same as civil commotion.


Risk: 1) Uncertainty as to financial loss. 2) The person or thing insured.


Risk Management: Preserving financial resources against loss through various methods including the purchase of insurance.


Robbery: In Crime insurance, the taking or attempted taking of property by one who has caused or threatened to cause bodily harm or committed and witnessed an obviously unlawful act.


Robbery And Safe Burglary Coverage: A Commercial Crime Coverage form that covers loss to property other than money or securities from robbery of a custodian, robbery outside the premises and safe burglary.


Running Down Clause: An Ocean Marine clause that provides protection should the ship owner be held liable for the negligent operation of the vessel in damaging another ship.


Salvage: Damaged property that may be retrieved, reconditioned, and sold to reduce an insured loss.


Schedule: A list of individual items covered under one policy with specific amounts of insurance applicable to each.


Scheduled Personal Property Endorsement: An endorsement to the Homeowners policy that schedules specific amounts of coverage for one or more of several categories of personal property on an all risks basis.


Seepage exclusion: A property insurance exclusion for losses arising from continuous or repeated seepage or leakage of water or steam from an insured system occurring over a period of more than 14 days. It is designed to eliminate claims for rotting of floors or support structures.

Self-Insurance: Financial preparation, in accordance with law, for meeting an insured's own risks by appropriating sufficient funds, in advance. Self-insurance does not mean "no insurance".


Self-Insurance Bond: A Surety bond that can be provided as evidence of compliance with an insurance requirement.

 Settlement: An adjustment where the disposition of the claim involves the payment of a sum of money to the insured or third-party claimant.


Severability Clause: A standard Liability insurance clause which means that insurance applies separately to each insured.


Short Rate: The method of calculating the return premium on policies cancelled by the insured, providing a penalty because of the cancellation.


Signs Coverage Form: A Commercial Inland Marine Coverage form that provides all risk coverage for neon, fluorescent, automatic or mechanical electrical signs.


Single Limits: In Auto Liability, policy limits that apply to all bodily injury and property damage arising from a single accident.


Small Business Boiler And Machinery Broad Form: A Boiler and Machinery Coverage form for small businesses that provides somewhat broader coverage than the standard Small Business Boiler and Machinery.


Solicitor: An individual appointed and authorized by an agent to solicit and receive applications for insurance as a representative of such agent.


Sound Receiving And Transmitting Equipment Endorsement: An endorsement that can be added to an Auto policy for such equipment permanently installed in the auto.


Specialty Company: An insurance company writing limited lines of coverage, not a broad across-the-board book of business.


Specific Insurance: Property specifically listed and covered for a specific amount. Also called Scheduled coverage.


Specified Perils Policy: A policy which names the specific perils insured against.


Straight Deductible: A deductible that specifies the deduction of a flat amount.


Stated Amount: An amount of insurance scheduled in a property policy that is not subject to any coinsurance requirement in the event of a loss. The amount scheduled is the maximum amount of insurance available in the event of loss.


Subdivision Bond: A Contract bond that may be required by an authority, guaranteeing that promised streets, walks, sewers, lights and other required improvements will be installed.


Subrogation: The assignment of rights of recovery from the insured to his insurer.


Subsidence: Sinking or settling of land caused by heavy rains or man-made caverns. Subsidence does not include earth movement caused by an earthquake.


Sue And Labor Clause: A clause in Ocean Marine policies that requires the insured to take all steps necessary to save and preserve goods from loss or to minimize a loss which has occurred.


Supply Contract Bond: A form of Contract bond which guarantees that a supplier will furnish supplies, products or equipment, sometimes including installation. See Contract bond.


Surety Bonds: Bonds which guarantee that someone will perform faithfully whatever he or she agrees to do or that someone will make an agreed upon payment to another party.


Syndicate: A group of insurers or underwriters who join to insure property that may otherwise be too high of a hazard.


Tapes And Records Endorsement: An endorsement that can be added to an Auto policy that provides coverage for tapes and records owned by the insured while contained in the covered auto.


Target Risk: A large, hazardous risk on which insurance is difficult to place.


Theatrical Property Coverage Form: All risks Commercial Inland Marine coverage form that covers scenery, costumes and theatrical property for either a single production or blanket for all productions.


Theft: In Crime insurance, a broad term encompassing any unlawful taking of property, but usually meant to exclude employee dishonesty and mysterious disappearance.


Theft, Disappearance and Destruction Coverage Form: A Commercial Crime Coverage form which covers money and securities for loss by theft, disappearance or destruction, both inside and outside of the premises.


Third Party Insurance Coverage: Those coverages under which the insured obtains protection against a legal obligation to pay damages to others because of injuries to persons or damage to property.


Third Party Loss: A situation involving a person other than the insurer and the insured.


Tort: A civil wrong other than a breach of a contract for which the court will provide a remedy in the form of an action for money damages.


Total Loss: The complete destruction of insured property; property that has disappeared or has been damaged irreparably or so there is no salvageable or reparable value. A total loss usually signifies the maximum settlement under the terms of a policy.


Uncontrolled Lines: Commercial Inland Marine coverages which are not standardized.


Underwriter: The insurance company or group that underwrites or insures a particular risk. It is also used as the identification of the individual within the company whose responsibility it is to accept or reject business in the particular line in which they specialize and in this way chooses risks their principals are prepared to underwrite.


Unearned Premium: The part of the premium which has not been used or earned, and which must be returned to the insured in the event of cancellation of policy by the company prior to its full term


Unfair Insurance Trade Practices Act: A Florida law describing certain practices that are prohibited, such as misrepresentation, denying claims without reasonable investigation, etc.


Unoccupied: A building that is furnished but in which nobody resides. Some property insurance policies suspend coverage if a building is unoccupied for more than a specified time, usually 60 or 90 days.


Unscheduled Coverage: A single coverage amount which applies generally to personal property. Also called blanket insurance.


Utmost Good Faith: A principle of insurance which states that the insurance company must be able to rely on the honesty and cooperation of the insured, and the insured must rely on the company to fulfill its obligations in good faith.


Vacancy: The absence of people and personal property from a building. Property coverage is often restricted when there are long periods of vacancy.


Valuable Papers Insurance: Inland Marine coverage form which provides all risk coverage for valuable papers such as manuscripts, blue prints, records, and other printed documents.


Value Reporting Endorsement: An endorsement that can be added to Commercial Property policies which sets the limit of insurance somewhat higher than expected peak values and then requires the insured to make periodic reports of actual values. These reports are averaged and the premium is then adjusted to reflect the average exposure.


Valued Policy: A policy wherein the insurer agrees, in advance, that the coverage limit applicable to the item will be considered its value.


Valued Policy Law: A statute, which states that if there is a total loss by an insured peril to a building, the insurer must pay the amount provided in the policy for which premium has been paid.


Vandalism And Malicious Mischief (V&MM): Protects property against damage caused by vandals. Many property forms contain Vandalism and Malicious Mischief coverage.


Vicarious Liability: Negligence which is not directly attributable to the person claimed against, but which is the negligence of another for whom the person claimed against is in some way responsible. See Contingent Liability.


Waiting Period: In disability insurance, a period of time between issuance and acceptance before sickness benefits begin.


Waiver: The voluntary or intentional relinquishment of a known right. A waiver may be expressed or implied.


Waiver Of Premium: An optional provision in Health insurance policies that states that if the insured becomes totally disabled, premiums are waived and coverage remains in force.


Warranty: A specific agreement between the insured and the insurer that certain conditions will be met. This agreement becomes a part of the policy.


Watercraft Endorsement: An endorsement to the Homeowners contract which provides coverage for watercraft which is excluded under the HO policy itself.


Workers Compensation Insurance: Insurance which covers an employer's obligations under Workers Compensation laws, which make the employer responsible for stated damages in the event of a work-related injury or illness. Workers Compensation coverage also includes separate coverage for Employers' Liability.


Write: To insure, to underwrite or to take an application.


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