It’s pretty much a known fact that insurance policies are littered with confusing insurance jargon that the average person probably won’t understand. We created our glossary of insurance terms in hopes that it will provide some much needed clarity when it comes to deciphering your insurance policy and any insurance terms that are thrown your way.
Actual Cash Value (ACV): The value of the property at the time of its loss or damage. ACV is often determined by the current market value (cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence). Valuation can often be subjective.
Act of God: An instance of uncontrollable natural forces in operation that could not have been prevented and outside of human control. For instance, hurricanes, tornadoes, earthquakes, and lighting strikes.
Actuary: A specialist in the mathematics of insurance who compiles and analyzes statistics and then uses the data to calculate insurance risks, rates, reserves, dividends, premiums. and other statistics.
Additional Living Expense (ALE): ALE refers to insurance coverage under a homeowner’s, condominium owner’s or renter’s insurance policy that covers the additional costs of living that are incurred by the policyholder when an insured loss requires you to be displaced and forced to live outside of your home while repairs are being made. An insurer will pay any reasonable increase in living expenses, including moving expenses, lodging, and food (restaurant) so that your household can maintain its normal standard of living while repairs are being made to your damaged home.
Adjuster: A representative agent who seeks to determine the extent of the insurer’s liability for loss when a claim is filed.
- Independent Adjuster: An independent adjuster is an adjuster working as an independent contractor representing one or many different insurance companies. They’re commonly used during catastrophes when the insurance companies staff of adjusters is not enough to handle the claim volume.
- Staff Adjuster: A staff adjuster is an adjuster employed directly by a particular insurance company.
- Public Adjuster: A public adjuster is an adjuster hired directly by the insured to represent their interests in the claim. Public Adjusters are typically paid on a contingency fee based on a small percentage of the settlement recovered from the insurance company.
Admitted Assets: Assets of an insurance company permitted by state law to be included in the company’s annual financial statements (usually the balance sheet). These assets can be important factor when regulators measure an insurance companies solvency. These assets often include include mortgages, accounts receivable, stocks, bonds and real estate.
Agent: An individual who sells and services insurance policies in either of two classifications:
- Independent Agent: An independent is an insurance agent that sells insurance policies from several different insurance companies, rather than a single insurance company. They serve their clients by searching the insurance marketplace for the best policy in regards to price and coverage while receiving a commission for the policies that he or she sells. The independent agent isn’t considered an employee of a specific insurance company.
- Direct or Career Agent: A direct or career agent represents only one company and sells only its policies. This agent is often pain on a commission basis in the same manner as an independent agent.
Aggregate Limit: Usually refers to the maximum amount an insurer will pay for covered losses during a policy period, no matter how many accidents occur. The annual aggregate limit is the total amount an insurer will pay in a given single year.
All Risk Policy: An all-risk insurance contract or open perils policy offers you coverage and protection from all risks or perils that could damage your home or contents and personal property except for those specifically excluded in the policy wording.
Annuity: An agreement by an insurer to make a fixed amount of periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Appraisal: Appraisal is a separate evaluation between two appraisers in which the two sides try to come to an agreement on the differences. If they cannot come to an agreement, a neutral third party umpire will determine the final ruling. Similar to arbitration.
Arbitration: A binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.
Arson: The intentional setting of one’s own property in an attempt to collect insurance compensation.
Assets: Assets refer to “all the available properties of every kind or possession of an insurance company that might be used to pay its debts.”
There are three classifications of assets:
- Invested Assets: Refers to things such as bonds, stocks, cash and income-producing real estate.
- All Other Assets: Refers to non-income producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums.
- Total Admitted Assets: Refers to everything a company owns.
All other plus invested assets equal total admitted assets. By law, some states don’t permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them “non-admissable.”
Balance Sheet: A statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.
Binder: Temporary or preliminary coverage until a policy can be written or delivered.
Boiler & Machinery Insurance (BM): Provides coverage to an object identified in the policy’s schedule for physical damage to and financial loss from equipment breakdown caused by an accident. Coverage can include extra expense, automatic 90-day coverage at new locations, defense against liability claims, and supplementary payments like those provided under public liability policies. This type of insurance can cover a wide range of equipment, including HVAC systems, ovens, boilers and furnaces, refrigeration units, elevators, office equipment, fired vessels, steam generators, mechanical and or electrical objects and turbines.
Broker: An insurance salesperson that searches the marketplace in the interest of clients and not the insurance companies.
Broker Agent: An independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant’s coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.
Broad Form: Insurance coverage extends beyond the basics to include rare events that may be of serious risk to the insured. This type of insurance usually requires that a higher premium, and often a deductible, be paid.
Builders Risk Insurance: A variation of property coverage specifically applicable to construction projects. It is commonly written in an amount to cover the value of the structure when completed and protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.The premium charged takes into account that values at risk increase gradually over the term of the policy.
Business Income Coverage (BIC): A type of property insurance policy which covers a company’s loss of income due to a slowdown or temporary suspension of normal operations which stem from damage to its physical property, protecting the income derived from an insured’s business activities following a covered peril. Coverage typically includes a businesses loss of income amd reasonable extra expenses the insured incurs to expedite return to normal business operations, but excludes ordinary operating expenses.
Business Personal Property (BPP): A term relating to the “contents” of a commercial enterprise and refers to moveable items owned by your business. It includes furniture, fixtures, office supplies, computers, machinery and equipment as well as stock, all other property owned by the insured, and even use interest in building improvements and betterments – basically everything except for the building itself.
Cancellation: Insurance carrier or insured stops coverage prior to the policy’s normal expiration date.
Capital: Equity of shareholders of a stock insurance company. The company’s capital and surplus are measured by the difference between its assets minus its liabilities. This value protects the interests of the company’s policyowners in the event it develops financial problems; the policyowners’ benefits are thus protected by the insurance company’s capital. Shareholders’ interest is second to that of policyowners.
Capitalization: Measures the exposure of a company’s surplus to various operating and financial practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be exposed to a high risk of instability.
Captive Agent: Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions.
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. Many casualty companies also write surety business.
Change in Net Premiums Written (IRIS): The annual percentage change in Net Premiums Written. A company should demonstrate its ability to support controlled business growth with quality surplus growth from strong internal capital generation.
Change in Policyholder Surplus (IRIS): The percentage change in policyholder surplus from the prior year-end derived from operating earnings, investment gains, net contributed capital and other miscellaneous sources. This ratio measures a company’s ability to increase policyholders’ security.
Chartered Property and Casualty Underwriter (CPCU): Professional designation earned after the successful completion of 10 national examinations given by the American Institute for Property and Liability Underwriters.
Claim: A request for reimbursement made by the insured, or the insured’s beneficiary, for a loss covered under the policy.
Civil Authority: An insurance policy provision that will typically extend coverage for Business Interruption and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property. The requirements for coverage under this provision are the existence of an order of civil authority which prohibits access to the insured premises, is caused by or results from physical damage to property other than insured property, that damage to property must be due to a peril covered under the policy, and that denial of access must be the proximate cause of loss of business income.
Civil Remedy Notice: In Florida, Civil Remedy, also known as “Bad Faith,” allows an individual to sue an insurance company for damages and to recoup court costs and attorney’s fees. In order to use this law, the person or their attorney, must submit a Civil Remedy Notice to the Department of Financial Services (DFS) and the insurance company at least 60 days prior to filing suit. This Notice must be submitted to DFS by using the DFS Civil Remedy website and then sent to the insurance company.
Coinsurance: Coinsurance refers to the bargain between a commercial property owner and an insurance company. The clause in property policies encourages the property owner to gauge coverage needs by possible, not probable, maximum loss.
Collapse: A property insurance peril, subject to its own specific agreement in commercial property policies, which otherwise insure on an open perils basis.
Company Adjuster: An adjuster who is employed and works solely for an insurance company or self-insured entity.
Commercial Lines: Refers to insurance for businesses, professionals and commercial establishments.
Comprehensive Insurance: Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Conditions: The part of the insurance policy that explains the obligations of the insured and the insurance company under the property, for property and liability. It explains your duties in the event of a loss and how the company will settle.
Covered Loss: An accident, including accidental damage by forces of nature which brings a contract of insurance into play.
Coverage: The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
Current Liquidity (IRIS): The sum of cash, unaffiliated invested assets and encumbrances on other properties to net liabilities plus ceded reinsurance balances payable, expressed as a percent. This ratio measures the proportion of liabilities covered by unencumbered cash and unaffiliated investments. If this ratio is less than 100, the company’s solvency is dependent on the collectibility or marketability of premium balances and investments in affiliates. This ratio assumes the collectibility of all amounts recoverable from reinsurers on paid and unpaid losses and unearned premiums.
Death Benefit: The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Debris Removal: A consequential coverage, which pays for, the insured’s expenses to remove debris of covered property caused by a Covered Cause of loss.
Declarations Page: Commonly the first page of your policy containing the name of the insured, the address, and the dollar amount of coverage provided, a description of the property, and the premium cost.
Deductible: The amount of the loss you (the insured) are required to pay out-of-pocket per claim or accident before the insurance kicks in.
Depreciation: The decrease in property value since the time it was built due to age or normal wear and tear.
Earned Premium: The amount of the premium that as been paid for in advance that has been “earned” by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
Elimination Period: The amount of time which must pass after filing a claim before policyholder can collect insurance benefits. Also known as a “waiting period.”
Endorsement: An attachment to your insurance policy that adds to, removes or changes the original terms. You can negotiate various types of endorsements to tailor a policy to your special needs.
Exclusions: Certain causes. items or conditions that are not covered by the general insurance contract or policy.
Expense Ratio: The ratio of underwriting expenses to net premiums written. This ratio measures the company’s operational efficiency in underwriting its book of business.
Exposure: Measure of vulnerability to loss, usually expressed in dollars or units.
Extended Replacement Cost: This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.
Extra Expense Coverage: Commercial property insurance that pays for additional costs in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss.
Fire: Combustion evidenced by a flame or glow. Insurance distinguishes between a “hostile” fire (one out of bounds) and “friendly” fire (such as that contained within the fire box of a stove).
Floater: A separate policy available to cover the value of goods beyond the coverage of a standard insurance policy. Including movable property such as jewelry, antiques, collectibles, firearms, etc.
Florida Insurance Guaranty Association: An organization of insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.
Flood Insurance: Policy underwritten by the federal government to cover damage from rising water.
Fraud: The intentional perversion of the truth in order to mislead someone into parting with something of value.
Fungi: Refers to, but is not limited to, any form or type of mold, yeast, mushroom or mildew whether or not allergenic, pathogenic or toxigenic Any substance, vapor or gas produced by, emitted from or arising out of any fungi or spores or resultant mycotoxins, allergens or pathogens.
General Liability Insurance: Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
Grace Period: The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time.
Guaranteed Replacement Cost Coverage: Pays for the full cost to replace or rebuild insured property, even if it costs more than your policy limits.
Hazard: A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
Health Maintenance Organization (HMO): Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
Hurricane Deductible: Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from one percent of a home’s insured value to 15 percent, depending on many factors that differ by state and insurer.
Indemnity: Restoration to the victim of a loss by payment, repair or replacement back to the “Pre-Loss Condition”.
Independent Adjuster: An trained and licensed insurance adjuster who works for multiple insurance companies or self-insured entities.
Impaired Insurer: An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.
Independent Insurance Agents & Brokers of America (IIABA): Formerly the Independent Insurance Agents of America (IIAA), this is a member organization of independent agents and brokers monitoring and affecting industry issues. Numerous state associations are affiliated with the IIABA.
Inflation Guard Coverage: An automatic annual raise in your coverage limits based on the insurance company’s estimate of rising building material and labor prices.
Inflation Protection: An optional property coverage endorsement offered by some insurers that increases the policy’s limits of insurance during the policy term to keep pace with inflation.
Insurable Interest: Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance: A mechanism whereby risk of financial loss is transferred from individual, company, organization, or other entity to an insurance company.
Insurance Policy: The document containing the contract between the insured and the insurer, which defines the right and duties of the contracting parties.
Insurance Adjuster: A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an “as needed” basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee.
Insurance Attorneys: An attorney who practices the law as it relates to insurance matters. Attorneys might be solo practitioners or work as part of a law firm. Insurance companies who retain attorneys to defend them against law suits might hire staff attorneys to work for them in-house or they might retain attorneys on an as-needed basis.
Insurance Institute of America (IIA): An organization which develops programs and conducts national examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss control management.
Investment Income: The return received by insurers from their investment portfolios including interest, dividends and realized capital gains on stocks. It doesn’t include the value of any stocks or bonds that the company currently owns.
Investments in Affiliates: Bonds, stocks, collateral loans, short-term investments in affiliated and real estate properties occupied by the company.
Insurance Regulatory Information System (IRIS): Introduced by the National Association of Insurance Commissioners in 1974 to identify insurance companies that might require further regulatory review.
Have a term that should be listed here? Let us know and we’ll add it to our glossary of insurance claim terms.
Have a term that should be listed here? Let us know and we’ll add it to our glossary of insurance claim terms.
Law & Ordinance Coverage: See below Ordinance or Law Coverage
Liability: Any legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liability Coverage: Insurance that covers for injuries to another or damage to another person’s property for which you are liable.
Liability Insurance: Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
Licensed: Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.
Licensed for Reinsurance Only: Indicates the company is a licensed (admitted) insurer to write reinsurance on risks in this state.
Lloyd’s: Generally refers to Lloyd’s of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd’s Corp. provides the support facility for their activities.
Lloyd’s Organizations: These organizations are voluntary unincorporated associations of individuals. Each individual assumes a specified portion of the liability under each policy issued. The underwriters operate through a common attorney-in-fact appointed for this purpose by the underwriters. The laws of most states contain some provisions governing the formation and operation of such organizations, but these laws don’t generally provide as strict a supervision and control as the laws dealing with incorporated stock and mutual insurance companies.
Limit of Insurance: The maximum amount of benefits your insurance policy pays in the event of a loss.
Living Benefits: This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Also known as “accelerated death benefits.”
Loss: The dollar value of property damage or physical injuries.
Loss Control: All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A combination of risk control techniques with risk financing techniques forms the nucleus of a risk management program. Avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.
Loss Ratio: The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company’s underlying profitability, or loss experience, on its total book of business.
Loss Reserve: The estimated liability, as it would appear in an insurer’s financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amounts not yet due. For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.
Loss of Use: An extra expense you incur while staying at a temporary location if your dwelling becomes uninhabitable.
Loss Adjustment Expenses: Expenses incurred to investigate and settle losses.
Losses and Loss Adjustment Reserves to Policyholder Surplus Ratio: The higher the multiple of loss reserves to surplus, the more a company’s solvency is dependent upon having and maintaining reserve adequacy.
Losses and Loss Adjustment Expenses: This represents the total reserves for unpaid losses and loss-adjustment expenses, including reserves for any incurred but not reported losses, and supplemental reserves established by the company. It is the total for all lines of business and all accident years.
Mortgage Insurance Policy: In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured’s death, or to meet the payments due on a mortgage in case of the insured’s death or disability.
Mutual Insurance Companies: Companies with no capital stock, and owned by policyholders. The earnings of the company, over and above the payments of the losses, operating expenses and reserves–are the property of the policyholders.
There are two types of mutual insurance companies:
- Non Assessable Mutual: Charges a fixed premium and the policyholders cannot be assessed further. Legal reserves and surplus are maintained to provide payment of all claims.
- Assessable Mutual: Companies that charge an initial fixed premium and, if that isn’t sufficient, might assess policyholders to meet losses in excess of the premiums that have been charged.
National Association of Insurance Commissioners (NAIC): Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.
Named Insured: The party of parties specifically named as insured in the insurance contract. Others may have claim on the coverage of a policy by way of internal provisions, but any such right is by way of the agreement between the named insured and the insurance company.
Named Perils: Individually itemized and covered perils stated in your (the insured) policy.
Noncancellable: Contract terms, including costs that can never be changed.
Non-renewal: The refusal by a company to renew your policy when it expires.
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.
Offer: The amount your insurance adjuster proposes to pay you for your loss.
Ordinance or Law Coverage:
- Coverage for Loss to the Undamaged Portion of the Building: Pays for the loss of value of an undamaged portion of the existing building, which must be demolished and/or removed to conform to municipal ordinance, code, etc.
- Demolition Cost: Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.
- Increased Cost of Construction: Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Peril: An event that causes a possible loss to your home and property such as fire, windstorm, and theft. Policies have two sets of perils: covered and excluded.
Personal Injury Protection: Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
Personal Lines: Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
Personal Property: Articles you own, wear or use while on your premises, also known as contents. Examples: clothing, furniture
Personal Property Floater: An endorsement that provides additional coverage for furs, jewelry, stamps, coins, antiques, computer, guns, and other items that exceed the normal low limits in your home policy.
Policy: The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Pre-Existing Condition: A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.
Preferred Provider Organization: A network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.
Premium: The price of insurance protection for a specified risk for a specified period of time. The amount you pay for your insurance policy.
Proximate Cause: That event which, in an unbroken sequence, results in direct physical loss under an insurance policy. For example, wind is the proximate cause of loss when a windstorm blows out a window that in turn topples a lit candle that sets fire to a structure and burns it down.
Public Adjuster: Public adjusters are trained and licensed insurance adjusters who work exclusively for the policyholder rather than the insurance company.
Qualifying Event: An occurrence that triggers an insured’s protection.
Quick Assets: Assets that are quickly convertible into cash.
Replacement Cost: Amount required to replace your damaged property with one of like kind and quality without deduction for depreciation.
Reinsurance: In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn’t fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
Renewal: The automatic re-establishment of in-force status affected by the payment of another premium.
Replacement Cost: The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
Reserve: An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.
Risk: Has two meanings: (a) the chance of loss such as from a peril; and (b) the person that is insured by a policy.
Risk Class: Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.
Risk Management: Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
Secondary Market: The secondary market is populated by buyers willing to pay what they determine to be fair market value.
Settlement: The dollar amount you agree to accept from the insurance company as payment for your loss.
Sewer Back-up/Water Coverage: Protects you against direct loss or damage caused by water entering your dwelling as a result of accidental escape of water from a sewer, storm drain, drain, sump, septic tank, eaves trough or downspout.
Scheduled Articles: Addition to a homeowner’s policy to provide extra coverage for listed items. Examples: jewelry, furs, stamp and coin collections, bicycles, cameras
Solvency: Having sufficient assets–capital, surplus, reserves–and being able to satisfy financial requirements–investments, annual reports, examinations–to be eligible to transact insurance business and meet liabilities.
Standard Auto: Auto insurance for average drivers with relatively few accidents during lifetime.
Statutory Reserve: A reserve, either specific or general, required by law.
Stock Insurance Company: An incorporated insurer with capital contributed by stockholders, to whom earnings are distributed as dividends on their shares.
Stop Loss: Any provision in a policy designed to cut off an insurer’s losses at a given point.
Subrogation: The right of an insurer who has taken over another’s loss also to take over the other person’s right to pursue remedies (to collect a debt or damages) against a third party (i.e., the insurance company).
Surplus: The amount by which assets exceed liabilities.
Terrorism: An ideologically motivated, unlawful act or acts Including but not limited to the use of violence or force or threat of violence or force committed by or on behalf of any group(s), organization(s) or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public
Tort: A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
Total Loss: A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
Umbrella Liability: Insurance protection against losses in excess of the amount covered by other liability policies.
Umbrella Policy: Coverage for losses above the limit of an underlying policy or policies such as homeowners 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.
Underwriter: The individual trained in evaluating risks and determining rates and coverages for the Insurance Company.
Underwriting: The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.
Underwriting Expenses Incurred: Expenses, including net commissions, salaries and advertising costs, which are attributable to the production of net premiums written.
Underwriting Guide: Details the underwriting practices of an insurance company and provides specific guidance as to how underwriters should analyze all of the various types of applicants they might encounter. Also called an underwriting manual, underwriting guidelines, or manual of underwriting policy.
Uninsured Motorist Coverage: Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.
Universal Life Insurance: A combination flexible premium, adjustable life insurance policy.
Usual, Customary and Reasonable Fees: An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor or required for treatment.
Vacant: All occupants have moved out with no intention of returning regardless of the presence of furnishings In the case of a newly constructed house, no occupant has yet taken up residence
Variable Life Insurance: A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.
Variable Universal Life Insurance: A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.
Whole Life Insurance: Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.
Have a term that should be listed here? Let us know and we’ll add it to our glossary of insurance claim terms.