PERSONAL INSURANCE GLOSSARY

Stephen B. Groton

Actual Cash Value
"Actual Cash Value" is the replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.
Additional Living Expenses
If your dwelling was rendered untenantable by fire or any other insured peril, it would probably be necessary to secure other quarters to continue daily activities. However, the use of such quarters would undoubtedly involve many extra expenses, such as rent, installation of telephones, etc. Additional Living Expense insurance covers such expenditures over and above your normal monthly expenses.
Additions and Alterations
Additions and Alterations coverage protects any additions, alterations, and improvements you make to your unit (ie. condo or townhome), for up to 10% of your contents limit. This coverage can be increased.
All Risk Insurance
An insurance policy that covers everything not specifically excluded. Most often associated with property coverage. An All-Risk policy is the opposite of a Named Perils insurance policy.
Appurtenant Structures (Other Structures)
Structures that are also on the property covered by an insurance policy. Examples might be a storage shed, detached garage or barn. Most property policies have a limit they will pay for other structures based on a percentage of the main buildings value.
Automobile Coverage
Any insurance pertaining to the use or ownership of a vehicle. Common coverages are liability, physical damage and personal injury.
Binder
A binder is a legal agreement that serves to give proof of insurance coverage for a specified period of time until the actual insurance policy can be issued. A binder can be issued by either an insurance agent or company and must provide the following information: •Name of insured •Type of insurance coverage •Limits of insurance •Covered perils •Name of insurance company •Effective Date
Blanket Coverage
For property insurance, a blanket sets a single limit (maximum payout) for multiple buildings, items or risks.
Blanket Insurance
Blanket insurance provides coverage under a single limit for the following: •Two or more items (e.g., Building and/or Contents) •Two or more locations (e.g., Location A and/or Location B) •A combination of items and/or locations
Bodily Injury Coverage
"Bodily injury" is defined as meaning bodily harm, sickness, or disease, including required care, loss of services, and death that results.
Builders' Risk Coverage
Indemnifies for loss of or damage to a building under construction. Insurance is normally written for a specified amount on the building and applies only in the course of construction. Coverage customarily includes fire and extended coverage and vandalism and malicious mischief. Builders risk coverage can be extended to a "special" form as well. The builders risk policy also may include coverage for items in transit to the construction site (up to a certain percentage of value) and items stored at the site.
Business Owners Package (BOP)
A single insurance policy which provides many types of coverages such as business auto, liability and property. BOPs are created and available for small to medium sized businesses and specifically for many specialized industries.
Cancellation
The end of an insurance policy. Usually applied to the premature ending of the policy for nonpayment but may be used to describe the ending of any insurance policy.
Certificate of Insurance
An official document created by an insurance carrier or agent to prove insurance coverage to a third party (ie. Mortgagee)
Claim
The formal request by a policy holder or claimant to be paid under the terms of the insurance policy.
Collision Coverage
This covers loss to the insured person's own vehicle caused by its collision with another vehicle or object.
Contents
Contents includes just about anything in the home (including garage and outbuildings) belonging to the policyholder or a member of his family living in the same house, or to resident domestic staff. It also includes property, which is not owned by the policyholder but for which he is responsible, such as rented property. Furniture, furnishings, household goods, electrical appliances, food and drink, clothes, and money up to a specified limit all count as 'contents'. Also included are movable fixtures and fittings, for example, special lighting fittings which would be taken away on removal. Fittings, which would be left in the house, such as built-in furniture, count as part of the 'buildings', although fitted carpets are classified as 'contents'. Certain types of property are excluded. The coverage applies principally to contents actually inside the home, although there is some coverage under a 'standard' policy for contents temporarily away from the home. Some policies also include theft of household contents from the garden or immediate vicinity of the home.
Co-Payment or Co-pay
"Co" means "together." A co-payment means you are paying some of the claim and the insurance company is paying some of the claim. You are sharing the cost of the claim with the company. This term is most often used in Health Insurance. The amount of the split is usually expressed as a percentage: If your co-pay is 30% then you pay 30% of the bill and the insurance company pays 70%.
Debris Removal Clause
This pays for the insured's expenses to remove debris of covered property caused by a Covered Cause of loss. This does not include "pollutants" and must occur during the policy period and reported within 180 days of the occurrence.
Deductible
An excluded amount or threshold for payment on an insurance policy. A $500 deductible would mean the insurance policy will start paying after they have deducted the first $500 from the amount of loss. Most deductibles re-set every year and you start all over at zero.
Difference In Conditions (DIC) Coverage
DIC insurance provides coverage designed to close specific gaps in standard insurance policies and is usually available only for larger industrial or commercial risks. It allows coverage to be customized to extend to such exposures as water damage, flood, collapse, earthquake, landslide, etc., according to the insured's needs. DIC coverage may be provided by means of a separate insurance policy or it may be added by endorsement to the basic policy.
Directors and Officers (D&O) Liability Coverage
Almost any day to day decision or action by anyone in the organization can trigger a lawsuit. Of all the lawsuits brought against nonprofit organizations, more than 50% involve employees. Even with the most diligent efforts to prevent employment disputes, the following claims can and are often alleged against businesses: •Discrimination due to race, sex, age, national origin, religion, disability, or sexual orientation •Wrongful termination •Sexual harassment •Promotions and compensation •Interference with employment contract •Hiring decisions •Conflicts of interest •Libel, slander, and defamation of character •Failure to supervise employees •Invasion of privacy •Copyright infringement, misrepresentation of ideas, and unauthorized use of logos
Dwelling
The structure of the home, namely the foundations, walls, floors, doors, windows, roof, plumbing, fixed electrical wiring, decorations, and insulation. It also includes permanent fixtures and fittings, such as kitchen units and fitted or built-in furniture. The general rule is that everything attached/ immovable that would be left behind on removal is treated as 'dwellings', and everything else as 'contents'. Fitted carpets are however generally treated as 'contents'; and whether TV and radio aerials are treated as 'dwelling' or 'contents' varies between insurers. Depending on the policy 'Dwelling' can extend to include outbuildings, garages, greenhouses and sheds; paths, drives, walls, and patios; and - for most of the risks covered by policy - fences and gates. Other Policies cover these items in Other Structures.
Earned Premium
The amount of the policy premium used at the time of a cancellation or expiration relative to the policy term. For example, if the policy term is one year then the earned premium at the six month point is 50% of the total premium. This is not an indicator of how much you'll get back if you cancel the policy because the total premium was partially based on the term.
Earthquake Coverage
Protects against damage by earthquakes and earth movement. Deductibles are typically a percentage of the property value.
Effective Date
The first day of a policy term. Denotes the beginning of the insurance coverage.
Employment Practices Liability Coverage
Protects the corporation, directors & officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote. Whether you are right or wrong in the eyes of the jury, the typical defense costs alone average $100,000 - $200,000 per case!
Endorsement
A document which changes or alters the basic insurance policy.
Excess Coverage
A type of insurance which covers all or a portion of a loss which exceeds an agreed amount. Excess policies usually do not come in to effect until the primary insurance limit has been reached. Excess policies provide higher limits and offer protection against very large losses.
Fire Coverage
Also known as property insurance, this coverage protects against property losses by fire or lightning. Also covers smoke and water damage from a fire.
Floater
An insurance policy that "floats around" with whatever is insured regardless of where (ie. jewelry "floats" around).
Homeowners Insurance
Insurance that combines liability insurance and hazard insurance. Required by most mortgage lenders.
Indemnify
To reimburse or otherwise pay for an incurred loss.
Independent Agent
An insurance agent that is affiliated with more than a single insurance company. An independent agent is able to shop several insurance carriers for the best plan for a particular insured.
Inland Marine Coverage
Inland marine insurance indemnifies loss to moving or moveable property and is an outgrowth of ocean marine insurance. Historically, ocean marine insurance held the transporter responsible for property loss before, during, and after the completion of the voyage. In the 1800's, the non-ocean portion of the journey grew as cargoes were transferred to barge, etc., and the term "inland marine" was coined. Inland marine policies became known as "floaters" since the property to which coverage was originally extended was essentially "floating." Applies to jewelry, fine art, etc.
Insurance
A contract by which one (the company) undertakes to indemnify another (you, the client) or to pay a specified amount upon determinable contingencies. Protection against risk, loss, or ruin, by a contract in which an insurer (the company) guarantees to pay a sum of money to the insured (the client), the claimant (the other party claiming to be injured by the insured), or the beneficiary (person receiving a benefit as designated by the insured, usually for life insurance), in the event of death, accident, fire, disease, flood, etc.
Jewelry Floater
An insurance policy which covers jewelry against loss or damage wherever it might be.
Kidnap and Ransom Insurance
Insurance policies designed to pay ransoms demanded by kidnappers. Typically covers named employees/individuals for individual or aggregate amounts. Most policies require the insured to participate in any loss with percentage deductibles.
Liability Coverage
A liability insurance policy will pay up to a stated limit for events resulting from the insured's negligence. A liability policy will also usually pay for property damage and medical expenses incurred by the injured party.
Limit
The maximum amount to be paid by an insurance policy. Many policies have split limits meaning they'll pay one amount per person and another amount per accident. A third split may be included to indicate the maximum amount the policy will ever pay regardless of the number of people or accidents.
Loss of Use coverage
Pays for expenses in the event a dwelling is deemed uninhabitable while repairs are being made due to a claim caused by a covered loss.
Medical Payments
For homeowners policies - pays for expenses for persons that are injured or hurt on your property. Also pays for some injuries that happen away from your home, such as your dog biting someone. For automobile policies - pays medical and funeral bills resulting from accidents, including those in which the victim is a pedestrian or bicyclist. Covers insured, family members and passengers in your car, regardless of who is ultimately held responsible for the accident.
Named Insured
The person or persons designated as the insured in an insurance policy.
Named Perils Insurance
An insurance policy which covers only defined perils or causes of loss. This is the opposite of an All-Risk policy which covers all perils except those specifically excluded.
Nonrenewal
When an insurance company decides it will not provide you insurance anymore; effective when your policy expires.
Other Structures (Appurtenant Structures)
Structures that are also on the property covered by an insurance policy. Examples might be a storage shed, detached garage or barn. Most property policies have a limit they will pay for other structures based on a percentage of the main buildings value.
Out-Of-Pocket Maximum
The total amount that you would have to pay out of your pocket, usually for the year. Your total share of paying claims after which the insurance company picks up 100% of the claim. This is the total of your deductible and co-pay and any other payments you have agreed to share with the company. Out-of-pocket maximum is most usually used in Health Insurance.
Peril
The cause of a loss. Examples of perils are fire, wind, an accident and acts of vandalism.
Personal Articles Floater
Insurance on items you have scheduled (listed), anywhere they might be and against all perils or causes of loss except those specified in the insurance policy.
Personal Automobile Coverage
Insurance for vehicles owned by individuals and not used for business purposes other than driving to and from work. Usually comprised of collision, comprehensive, liability and medical coverages.
Personal Injury Liability Coverage
This insurance coverage protects against false arrest, detention or imprisonment, or malicious prosecution; libel, slander, defamation, or violation of right of privacy; and wrongful entry, eviction, or other invasion of right of private occupancy.
Personal Injury Protection Coverage (PIP)
Same as medical payments coverage, plus lost income and cost of care giver for an injured person. Covers insured, family members and passengers in your car, regardless of who is ultimately held responsible for the accident.
Personal Package Policy
A single policy for individuals which combines property, automobile and sometimes other coverages in to a single insurance policy resulting in a lower cost than if each were purchased separately.
Personal Property Floater (PPF)
Insurance for homeowners covering all household effects such as furniture, appliances and clothing. Typically does not require the items to be specified on a list or schedule but does have a limit.
Physical Damage Coverage
Insurance against damage to tangible property. Automobile physical damage covers damage to your vehicle.
Pleasure Use
A term used to indicate a vehicle is not used for any business purpose other than driving to and from work. Required to obtain private passenger automobile insurance.
Policy
A formal contract outlining the terms and conditions of the insurance provided by an insurance carrier.
Premium
The amount you are asked to pay for an insurance policy.
Property Damage Liability Coverage
Protects against loss caused by your negligent damage of someone else's property.
Protection Class
A scale of 1 to 10 used to measure the fire protection of every area in the United States. Ten is the worst and one is the best. The rating is based on such items as the water supply, the fire department proximity, vegetation and climate.
Renewal
A new policy which replaces one that is expiring or cancelled.
Renters Insurance
Very much like a homeowners policy without the property coverage since renters do not own the building they live in. Covers liability and personal effects such as furniture and clothing.
Replacement Cost Coverage
This form of insurance provides coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy.
Return Premium
The amount of premium that is returned to you by an insurance carrier after a policy is cancelled during the policy period.
Risk
What makes you buy insurance. It is anything you don't want to lose or have damaged including yourself.
Risk Manager
The entity in charge of identifying, evaluating and managing the potential perils and factors that increase risk.
Schedule
In insurance, a schedule is a list attached to a policy. A jewelry schedule is a list of jewelry you own that is covered by an insurance policy. A vehicle schedule is a list of vehicles attached to and covered by an insurance policy.
Specified Perils
An insurance policy which only covers causes of loss or perils specified in the policy.
Split Limits
The practice of providing separate limit amounts for each type of coverage contained within a single policy. An automobile policy could have separate limits for bodily injury and physical damage.
Stated Amount
When the value of a property is stated within the policy and is not dependent on valuation methods applied at the time of a loss.
Subrogation
In insurance, the process where an insurance carrier negotiates in behalf of the insured to settle a claim the carrier is liable for.
Surplus Lines Tax
A tax paid by the insured on insurance placed with surplus lines carriers. It is collected by the agent and paid to the state.
Surplus Lines Insurance
Insurance placed with carriers not licensed in the same state as the risk. Surplus lines laws differ in each state but generally require that the insured attempt to place the insurance with a licensed carrier before using a surplus lines carrier. Proof of this placement attempt is also typically required.
Umbrella Liability Coverage
This type of liability insurance provides excess liability protection. You need this coverage for the following reasons: •It provides excess coverage over the "underlying" liability insurance you carry. •It provides coverage for other liability exposures, except a few specifically excluded exposures. Underinsured Motorist Coverage Fills in when a negligent party doesn't have enough insurance to cover your loss or claim.
Uninsured Motorist Coverage
Fills in when a negligent party doesn't have any insurance to cover your loss or claim.
Underlying Limits
Associated with excess and umbrella coverages. Refers to the limit of the primary policy and where the umbrella or excess coverage begins. Most excess and umbrella policies have a required underlying limit.
Unearned Premium
The amount of the unused policy premium at the time of a cancellation or expiration relative to the policy term. For example, if the policy term is one year then the unearned premium at the six month point is 50% of the total premium. This is not an indicator of how much you'll get back if you cancel the policy because the total premium was partially based on the term.
Watercraft Insurance
Typically sold as a package policy comprised of physical damage (hull), personal injury and liability coverages. Protects from the risks associated with owning and operating a watercraft.
Workers' Compensation Coverage
A system of compensation for work-related injuries or death, paid for by employer compensation insurance contributions. All employers must have worker's compensation insurance of some kind.