following definitions of standard Insurance
Terms are from Merritt Professional
Publishing Georgia Licensing Sourcebook and
other insurance sources. They are included
below for your information. The content is
believed accurate but is not guaranteed.
(Click a Letter to Quick Link to that part
of the Alphabet)
Giving up the proprietary rights in insured
property to the Underwriter in exchange for
payment of a constructive total loss.
An unexpected fortuitous event, unforeseen
and unintended, not under the control of an
insured and resulting in a loss.
The number of times an accident occurs. Used
in predicting losses upon which premiums are
A form of health insurance against loss by
ACCIDENTAL DEATH: Coverage in the
event of death due to an accident, usually
in combination with dismemberment insurance.
ACCOUNTS RECEIVABLE POLICY:
An inland marine (also burglary) policy
written to protect the insured from
financial loss due to his inability to
collect amounts owed him because of the
destruction of his records.
ACT OF GOD:
A flood, an earthquake or other accident or
event that is without any human intervention
and that could not have been prevented by
reasonable care or foresight, but is the
result of natural causes (A snowstorm is an
Act of God; driving in one is an act of
ACTUAL CASH VALUE:
of money required to pay for damages or lost
property, computed on the basis of
replacement value less its depreciation by
obsolescence or general wear.
ACTUAL TOTAL LOSS:
(1) the insured property is completely
(2) the Assured is irretrievably deprived
of the insured property or
(3) cargo changes in character so that it
is no longer the thing that was insured or
(4) a ship is posted "missing" at
Lloyd's, in which case both the ship and its
cargo are deemed to be an actual total loss.
ACTUARY: A professional trained in
the mathematics of insurance and risk
ADD-ONS: Additional coverages to
your basic policy.
A person or firm or corporation other than
the named insured on a policy or mortgage
company named in a mortgagee clause, who is
protected against loss by the terms of the
policy or mortgage company named in the
An individual representing the insurance
company and acting for the company in
working on agreements as to the amount of a
loss and the liability of the company in
Selection against the insurance company;
the tendency of more poor risks to buy and
maintain insurance than good risks.
AGENTS: Two types of agents sell
insurance: (1) Independent Agents are
self-employed business people who typically
represent more than one insurance company
and are paid on a commission basis; and (2)
Exclusive Agents represent only one
insurance company and may be salaried or
work on a commission basis.
against loss or damage to property arising
from any fortuitous cause, except such as
may be specifically excluded.
ANNUITY: A life insurance company
contract that pays a periodic income benefit
for a specified period of time.
APPLICATION: A signed statement by
a prospective insured client which becomes a
part of the insurance contract.
A survey of property made for determining
its insurable value or the amount of loss
The passing of beneficial rights from one
party to another.
A risk which underwriters do not care to
insure, but because of state law or
otherwise, the insured must be protected and
the insurance is therefore handled through
the state and assigned to companies.
Liability which would not rest upon a
person except that he has accepted
responsibility by contract expressed or
implied. This is also known as contractual
AUTOMOBILE INSURANCE PREMIUM DISCOUNTS:
A discount offered to drivers for such
safeguards as air bags, seat belts, good
driving record, anti-theft devices, multiple
AUTOMOBILE FLEET POLICY:
A commercial automobile policy covering five
or more automobiles.
A marine partial loss. This can be
particular average or general average (see
A clause in a marine insurance policy,
whereby partial losses are subject to
special conditions (e.g. a franchise or
deductible is to be applied to claims).
A person or concern having possession of
property committed in trust from the owner.
BAILEE'S CUSTOMERS POLICY:
A policy providing for loss or or damages to
property of bailee's customers, payable
either to bailees for their account or
direct to customers.
BASIC COVERAGE FORM:
Any of the commercial or personal insurance
property forms which provide basic
coverages. These forms generally provide the
most limited coverage, which is surpassed by
"Broad Forms" and "Special Forms."
The manual rate, from which are taken
discounts or to which are added charges to
compensate for the individual circumstances
of the risk.
BENEFICIARY: Designation by the
owner of a life insurance policy indicating
to whom the proceeds are to be paid upon the
insured's death or when an endowment
BENEFIT OF INSURANCE CLAUSE:
A clause by which the bailee of goods claims
the benefit of any insurance policy effected
by the cargo owner on the goods in care of
the bailee. Such a clause in a contract of
carriage, issued in accordance with the
Carriage of Goods by Sea Act, is void at
BILL OF LADING:
Contract of carriage and receipt for goods,
issued by carrier.
(Or Binding Receipt): In lines other
than life and health, a binder is an
acknowledgement (usually from the agent)
that insurance applied for is in force
whether or not premium settlement has yet
been made or the policy issued. In life and
health insurance, binders are not issued,
but if premium settlement is made with the
application, what is often erroneously
referred to as a "binder" is issued.
Actually this is a conditional binding
(1) Property-liability insurance that covers
more than one type of property in one
location in one policy or form instead of
under separate items, or one or more types
of property at more than one location; (2) A
contract of health insurance that covers all
of a class of persons not individually
BODILY INJURY LIABILITY:
The liability which may arise from injury or
death of another person.
BOILER AND MACHINERY POLICY:
Insurance against loss due to accidents to
boilers, pressure vessels or other machinery
including the equipment itself, as well as
liability arising out of the accident.
obligation of the insurance company to
protect one against financial loss caused by
acts of another.
BUILDER'S RISK COVERAGE FORM:
A commercial property coverage form
specifically designed for buildings in the
course of construction.
BUILDER'S RISK INSURANCE:
Insurance against loss to buildings or
structures in the course of construction.
BUILDINGS AND PERSONAL PROPERTY COVERAGE
A commercial property coverage form designed
to insure most types of commercial property
(buildings or contents or both). It is the
most frequently used commercial property
form, and has replaced the General Property
Form, Special Building Form, Special
Personal Property Form, and others.
BUSINESS AUTO COVERAGE FORM:
The latest commercial Automobile Insurance
coverage form, which may be written as a
monoline policy or as part of a commercial
package. This form has largely replaced the
Business Auto Policy.
BUSINESS INCOME COVERAGE FORM:
A commercial property form providing
coverage for "indirect losses" resulting
from property damage, such as loss of
business income and extra expenses incurred.
It has replaced earlier Business
Interruption and Extra Expense forms.
BUSINESS INTERRUPTION INSURANCE:
A type of policy that pays for loss of
earnings when operations are curtailed or
suspended because of property loss.
The term used to describe the liability
coverages provided by the Businessowners
Liability Coverage Form. It includes
liability for bodily injury, property
damage, personal injury, advertising injury,
and fire damage.
BUSINESS PERSONAL PROPERTY:
Traditionally known as "contents," this term
actually refers to furniture, fixtures,
equipment, machinery, merchandise,
materials, and all other personal property
owned by the insured and used in the
C & F:
A sale term relating to goods. Cost and
Freight. The consignee makes his own
insurance arrangements for the goods
throughout the period of transit.
CANCELABLE POLICY: A policy which
may be terminated by the company or the
insured by proper notification sent to the
other party according to terms set forth in
(1) An insurance company which "carries" the
insurance. (The terms "insurance company" or
"insurer" are preferred because of the
possible confusion of "carrier" with
transportation terminology). (2) In
transportation, the trucker, air carrier,
ocean steamship company or other entity
which moves the goods. (See "Contract
CASH SURRENDER VALUE: Money the
policyholder is entitled to receive from the
insurance company upon surrendering a life
insurance policy containing a cash value
That type of insurance that is primarily
concerned with losses caused by injuries to
persons and legal liability imposed for such
injury or for damage to property of others.
It also includes such diverse forms as Plate
Glass, insurance against crime, such as
robbery, burglary or forgery, Boiler and
Machinery insurance, and Aviation insurance.
Many casualty companies also write surety
CAUSES OF LOSS:
Under the latest commercial property forms,
this term replaces the earlier term "perils"
CLAIM: (1) A formal request for
payment of a loss under an insurance
contract or bond; (2) The actual amount of
the final settlement.
CLAIMANT: One who seeks
reimbursement for loss under the terms and
conditions of the insurance contract.
A policy providing liability coverage only
if a written claim is made during the policy
period or any applicable extended reporting
period. For example, a claim made in the
current reporting year could be charged
against the current policy even if the
injury or loss occurred many years in the
past. If the policy has a retroactive date,
an occurrence prior to that date is not
covered. (Contrast this with "Occurrence
CLASSIFICATION CLAUSE (CARGO):
A clause in a cargo insurance open cover
which details the minimum classification for
an overseas carrying vessel that is
acceptable to the insurers for carriage of
the insured goods at the premium rate/s
agreed in the contract. Goods carried by
lower class vessels are accepted under the
open cover, subject to payment of an
CLAUSE: A section or paragraph in
an insurance policy that explains, defines
or clarifies the conditions of coverage.
COBRA (Consolidated Omnibus Budget
Reconciliation Act): A federal law
under which group health plans sponsored by
employers with 20 or more employees must
offer continuation of coverage to employees
who leave their jobs, voluntarily or
otherwise, and their dependents; gives
individuals and their dependent families the
right to continue their health care coverage
for as long as 18 months.
(1) In property insurance, a clause under
which the insured shares in losses to the
extent that he is underinsured at the time
of loss. (2) In health insurance, a
provision that the insured and insurance
company will shared covered losses in agreed
proportion. In health insurance, the
preferred term is "percentage
Physical damage protection for the insured's
own automobile(s) for damage resulting from
a collision with another object or upset.
COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE
General liability coverage which may be
written as a monoline policy or part of a
commercial package. "CGL" now means
commercial general liability forms which
have replaced the earlier "comprehensive"
general liability forms. The latest forms
include all sublines, provide very broad
coverage, and two variations are available,
"Occurrence," and "Claims Made," coverage.
Traditional name for physical damage
coverage for losses by fire, theft,
vandalism, falling objects and various other
perils. On Personal Auto Policies this is
now called "other than collision" coverage.
On commercial forms, it continues to be
called "comprehensive coverage."
COMPREHENSIVE GENERAL LIABILITY POLICY:
A policy covering a variety of general
liability exposures, including Premises and
Operations (OL&T or M&C), Completed
Operations, Products Liability, and Owners
and Contractors Protective. Contractual
Liability and Broad Form coverages could be
added. In most jurisdictions the
"Comprehensive General Liability Policy" has
been replaced by the newer "Commercial
General Liability (CGL) forms which include
all the standard and optional coverages of
the earlier forms.
COMPREHENSIVE PERSONAL LIABILITY POLICY
A personal liability contract. It provides
personal liability coverage for the
individual and family needs arising out of
numerous personal activities and situations,
such as the ownership of residential
property, ownership of pets, sports
activities, and many other everyday
A contract of health insurance that provides
that the insured may renew the contract to a
stated date or an advanced age, subject to
the right of the insurance company to
decline renewal only under conditions
defined in the contract.
A loss arising indirectly from an insured
CONSTRUCTIVE TOTAL LOSS:
A partial loss of sufficient degree to make
the cost of repairing as much or more than
the property is worth or is insured for.
A transportation company which carries the
goods of only certain customers and not the
public in general as in the case of a common
Liability assumed under any contract or
agreement. Coverage is generally limited in
liability policies, but in most cases may be
provided for an additional premium.
The term relates to circumstances where more
than one party covers the risk. Each party
is deemed to be liable for his proportion of
the loss. If the Assured recovers in full
from one insurer, that insurer is entitled
to recover from the other insurer for that
part of the loss which should have been paid
by the latter. The term is used in marine
insurance, also, in relation to
contributions paid by the Assured in
connection with salvage and/or general
The value on which a contribution to a
general average loss or salvage award is
CONVERSION PRIVILEGE: A right
granted to group certificate holders, by
which they may obtain an individual policy
(upon leaving the group) regardless of
CO-PAYMENT: The portion, either a
percentage or a fixed dollar amount, of a
medical bill that a patient pays. The
insurer pays the rest.
Marine term referring to damage to baled
or bagged goods (e.g. cotton) caused by
excessive moisture from damp ground or
exposure to weather, or by grit, dust or
sand forced into the insured property by
windstorm or inclement weather.
(1) A contract of insurance; (2) To effect
insurance; (3) To include within the
coverage of a contract of insurance.
COVERAGE: The scope of protection
provided under the contract of insurance.
Any one of the individual commercial
coverage parts that may be attached to a
A mechanism that determines whether a policy
covers a particular claim for loss. For
example, the difference between the coverage
triggers of liability "occurrence" forms and
"claims made" forms is that the loss must
occur during the policy period in the first
case and the claim must be made during the
policy period in the second case.
That page of the insurance policy which
lists the insurance company, its address,
name of the policyholder, starting and
ending dates of coverage, and the actual
coverages given in the contract, including
the locations and amounts.
DEDUCTIBLE: The amount of loss paid
by the policyholder before the insurance
policy benefits become payable.
DENTAL INSURANCE: Coverage for
dental services under a group of individual
Decrease in the value of any type of
tangible property over a period of time
resulting from use, wear, tear,
deterioration, and obsolescence.
DIRECT OR HELD COVERED:
A condition requiring that the insured
voyage be direct from one place to another.
If the voyage is delayed en route or there
is a deviation from the direct route the
insurance cover continues subject to payment
of an additional premium, but only if the
Assured gives prompt notice of such delay or
deviation immediately on receipt of advices,
unless the policy provides otherwise.
DISABILITY: A condition that
curtails to some degree a person's ability
to carry on his normal pursuits. A
disability may be partial or total, and
temporary or permanent.
DISABILITY INSURANCE: A type of
health insurance that pays a monthly income
to the policyholder when he or she is unable
to work because of illness or accident.
The duty of the Assured and his broker to
tell the Underwriter every material
circumstance before acceptance of the risk.
The time allowed the insured after
termination of certain bond and policy
provisions to discover that he has sustained
a loss which occurred during the period
covered by the contract.
DUTY OF ASSURED CLAUSE:
This appears in the Institute Cargo Clauses
published for use with the MAR form of
policy. It directs the attention of the
Assured, his agents, etc. to the duty (as
required by the MIA, 1906) to take
reasonable measures to avert or minimize any
loss which is recoverable under the policy;
also to ensure that all rights against
carriers and others are properly preserved
and exercised. Underwriters agree to
reimburse the Assured for any reasonable
expenditure incurred by his compliance with
the clause; in practice, these expenses are
termed "sue and labor" charges (see Sue &
That portion of a premium for which the
policy protection has already been given
during the now-expired portion of the policy
The date on which an insurance policy or
bond goes into effect, and from which
protection is furnished.
ELECTRONIC DATA PROCESSING COVERAGE (EDP):
Specialized type of insurance designed to
cover computer equipment, data systems,
information storage media, and expense or
income losses related to EDP losses.
A loosely-used term sometimes designating
the waiting period and sometimes the
EMPLOYERS LIABILITY INSURANCE:
Coverage against common law liability of an
employer for accidents to employees, as
distinguished from liability imposed by
workers compensation law.
EMPLOYERS NON-OWNERSHIP AUTOMOBILE
(1) Liability arising out of the operation
of an automobile not owned by the insured.
This frequently results when an employee
uses his own personal car in the business
activities of the insured; (2) Insurance
coverage for the liability exposure
A form attached to the policy bearing the
language necessary to change the terms of
the policy to fit special circumstances.
ENGLISH JURISDICTION CLAUSE:
A condition, printed in the MAR form of
policy, whereby Underwriters agree to
recognize judgments only from courts
convened within English jurisdiction.
Subscribing Underwriters may agree to
replace this clause with a foreign
jurisdiction clause. Please note this is not
applicable to business emanating from the
United States of America which is subject to
the Service of Suit Clause (USA) appearing
in the Standard Conditions.
ENGLISH LAW AND
This clause appears in Institute clauses
published for use with the MAR form or
policy. It applies where a foreign
jurisdiction clause attaches to the policy
and requires that the foreign court shall
base its decisions on English law and
ERISA (Employment Retirement Income Security
Act of 1974): A federal law that
established rules and regulations to govern
private pension plans. Most self-insured
health plans are created under this act.
EVIDENCE OF INSURABILITY: Any
statement of a person's physical condition,
occupation, etc., affecting his acceptance
EXCLUSIONS: Specified hazards for
which a policy will not provide benefit
payments. (Often called Exceptions)
The loss record of an insured, class of
coverage, or of an insurance company.
EXPERIENCE RATING: Determination of
the premium rate for an individual risk,
made partially or wholly on the basis of
that risk's own past claim experience.
(1) State of being subject to the
possibility of loss; (2) extent of risk as
measured by payroll, gate receipts, area, or
otherwise; (3) possibility of loss to a risk
being caused by its surroundings.
EXTENDED COVERAGE ENDORSEMENT:
A specific endorsement attached to a
Standard Fire policy, usually providing
coverage of windstorm, hail, explosion,
riot, riot attending civil strike, aircraft,
vehicular damage, smoke and civil commotion.
EXTENDED REPORTING PERIOD (ERP):
A period allowed for making claims after
expiration of a "claims made" liability
policy. Also known as a "tail."
FAS: Incoterm meaning Free
FAC: Incoterm meaning "Free
FOB: Incoterm meaning "Free On
FPA: Free of Particular Average
(see Average or Particular Average)
FIDELITY BOND: A bond which will
reimburse an employer for loss up to the
amount of the bond, sustained by an employer
(the insured) by reason of any dishonest act
of an employee (or employees) covered by the
FIRE: Combustion sufficient to
product a spark, flame or glow and which is
hostile (as opposed to friendly - i.e. not
in the place where it is intended to be as
in a furnace or fireplace.)
FIRE INSURANCE: (1) Insurance
contracts that indemnify an insured for loss
caused by the destruction of the insured's
property resulting from a fire; (2) The
field of insurance that provides insurance
policies on the insured's property for a
variety of perils, including fire.
FIRST NAMED INSURED: The first
named insured appearing on a commercial
policy. The latest forms permit the insurer
to satisfy contractual duties by giving
notice to the "first" named insured rather
than requiring notice to all named insureds.
FLAT CANCELLATION: Cancellation of
an insurance policy as of the date of its
start with no premium charge.
FLOATER POLICY: A policy under the
terms of which protection follows moveable
property, covering it wherever it may be.
FRANCHISE: A provision in freight
insurance conditions which exempts the
insurer from particular average losses, in
any one accident, under 3%. The provision is
waived if the loss is caused by fire, or by
the ship stranding, sinking or being in
FREIGHT: (1) Goods moved for
another or, (2) The remuneration earned by a
shipowner or manager for the carriage of
goods; including the profit derived from
carrying his own goods.
GARAGEKEEPERS LEGAL LIABILITY POLICY:
Coverage for losses for which the insured is
legally liable, caused by fire or explosion,
theft of an entire vehicle, riot and
vandalism, collision, and upset to
automobiles in his care, custody and
GARAGE LIABILITY POLICY: A
liability contract designed to provide the
owner of a garage operation with the
liability protection needed for the special
hazards that exist there.
GENERAL AGGREGATE LIMIT: A
Commercial General Liability limit that
applies to all damages paid for bodily
injury, property damage, personal injury,
advertising injury, and medical expenses,
except damages included in the
products-completed operations hazard.
GENERAL AVERAGE: An Ocean Marine
coverage meaning a partial loss which has
resulted from the voluntary and deliberate
sacrifice of some cargo for the benefit of
all concerned, and which must be shared by
all parties (owners of ship, cargo and
freight) in proportion to their interest.
For example, if 100 containers were
jettisoned from a 1000 container load in
order to protect the ship, the owners of the
remaining 900 containers, the owners of the
ship, and the owners of the freight would
all contribute to offset the losses of those
whose cargo was jettisoned for the benefit
of the whole.
GENERAL AVERAGE CONTRIBUTION: The
proportion paid or payable by a saved
interest involved in a general average act.
GENERAL AVERAGE DEPOSIT: Paid by a
consignee to obtain release of the cargo
from the carrier following a general average
act. This may be replaced by an
GENERAL AVERAGE GUARANTEE: Paid by
a consignee to obtain release of the cargo
from the carrier following a general average
act. This may be replaced by an
GENERAL AVERAGE IN FULL -aka- G-A IN FULL:
An agreement in a cargo insurance whereby
Underwriters do not reduce a claim for
general average contribution in event of
GENERAL EXCLUSION CLAUSE: A clause
in the Institute Cargo Clauses 1982, which
specifies risks that are excluded,
irrespective of the risks covered elsewhere
in the wording.
GLASS COVERAGE FORM: A commercial
property form used to insure plate glass,
lettering, frames and ornamentation. It has
replaced earlier commercial glass insurance
GOOD FAITH: A basic principle of
insurance. The Assured and his broker must
disclose and truly represent every material
circumstance to the Underwriter before
acceptance of the risk. A breach of good
faith entitles the Underwriter to avoid the
contract. (Proposed changes in law may
affect this definition - also see "Utmost
GUARANTEED RENEWABLE POLICY: A
policy which the insured has the right to
continue in force by the timely payment of
premiums to a specified age, (usually age
50) during which period the insurer has no
right to make unilaterally any change in any
provision of the policy while the policy is
in force but make changes in premium rates
for the entire policyholder classification.
(See also "Non-Cancelable Policy".)
HAZARD: A specific situation that
increases the probability of the occurrence
of loss arising from a peril, or that may
influence the extent of the loss. For
example, accident, sickness, fire, flood,
liability, explosion are perils. Slippery
floors, unsanitary conditions, shingled
roofs, congested traffic, unguarded
premises, and uninspected boilers are
HEALTH INSURANCE: Protection
against the costs of hospital and medical
care or lost income arising from an illness
or injury (sometimes called Accident &
HELD COVERED: A provisional
acceptance of risk, subject to confirmation
at a later date that the agreed cover is
needed. Where applicable to an existing
insurance, cover is conditional, in
practice, on prompt advice to the
Underwriter as soon as the Assured is aware
of the circumstances to be held covered
coming into effect, and a reasonable
additional premium is payable if the risk
held covered comes into effect.
HIRED AUTOMOBILE: Autos the
insured leases, hires, rents or borrows but
not autos owned by employees or members of
HIT AND RUN: Collision between a
motor vehicle with another motor vehicle,
object or pedestrian, where the driver of
the vehicle leaves the scene of the accident
without identifying himself.
HMO (Health Maintenance Organization): An
organization that provides health care for a
monthly payment set in advance. In a
traditional HMO, doctors and other providers
are salaried employees and the facilities
are owned by the organization. In recent
years, however, other forms of HMOs have
sprung up that contract with doctors and
hospitals to care for members at set,
negotiated fees. Many HMOs are hybrids,
offering both kinds of care to members.
HOLD-HARMLESS AGREEMENT: A
contractual arrangement whereby one party
assumes the liability inherent in a
situation, thereby relieving the other party
of responsibility. Such agreements are
typically found in contracts like leases. A
typical lease may provide that the lessee
must "hold harmless' the lessor for any
liability from accidents arising out of the
ICC CLAUSES: (see Institute Cargo
INDEMNIFY: To restore the victim of
a loss, in whole or in part, by payment,
repair or replacement.
INDEMNITY BOND: A bond which
indemnifies the obligee against loss which
arises as a result of failure on the part of
a principal to perform.
INDEPENDENT ADJUSTER: An adjuster
who works as an independent contractor,
hiring himself out to insurance companies or
other organizations for the investigation
and settlement of claims.
INDEPENDENT CONTRACTOR: One who
agrees to perform according to a contract
and who is not an employee.
INHERENT VICE: A defect or cause of
loss arising out of the nature of the goods
INLAND MARINE INSURANCE: A branch
of the insurance business which developed
from the insuring of shipments which did not
involve ocean voyages. Exposures eligible
for this form of protection are described in
the nationwide definition of Marine
Insurance. Such diverse properties as
bridges, tunnels, jewelry, and furs can now
be written under Inland Marine forms.
INSTITUTE CARGO CLAUSES: Treaty
wordings developed by the International
Chamber of Commerce. There are three basic
sets of these clauses (A, B and C). The A
clauses cover "all risks", subject to
specified exclusions. The B and C clauses
cover specified "risks", subject to
specified exclusions. (See actual ICC
Clauses treaty wordings via "Ocean
Reference" link at left.)
INSURABLE INTEREST: A direct
monetary interest in the insured property
sufficient to result in monetary loss should
the property be damaged or destroyed.
INSURABLE RISK: A risk which meets
most of the following requisites: (1) The
loss insured against must be defined; (2) It
must be accidental; (3) It must be large
enough to cause hardship to the insured; (4)
It must belong to a homogenous group of
risks large enough to make losses
predictable; (5) It must not be subject to
the same loss at the same time as a large
number of other risks; (6) The insurance
company must be able to determine a
reasonable cost for the insurance; (7) The
insurance company must be able to calculate
the chance of loss.
INSURANCE: A system to protect
persons, groups, or businesses against the
risks of financial loss by transferring the
risks to a large group who agree to share
the financial losses in exchange for premium
The person whose risk is
transferred and shared; the party to an
insurance agreement whom the insurer agrees
to indemnify for losses, provide benefits
for, or render services to.
INSURER: The company or group
offering protection through the sale of an
insurance policy to an insured; the party to
an insurance agreement who undertakes to
indemnify for losses, provide pecuniary
benefits, or render services.
JOINT LIFE POLICY: Pays the
insurance amount when the first of two or
more covered persons dies.
KEY MAN (KEY EMPLOYEE) INSURANCE POLICY:
An insurance policy on the life of a key
employee whose death would cause the
employer financial loss, owned by and
payable to the employer.
KNOWN LOSS: A loss known to one or
both parties when a broker and Underwriter
are negotiating a placing.
LEASE: Contract whereby the owner
or user of property (the lessor) agrees to
let another party, (the lessee) use the
property for a consideration (money or
LEASEHOLD INSURANCE: Insurance for
the tenant of a property leased against the
loss of value of the lease or of profit from
a sub-lease through termination of the lease
by fire or other peril insured against.
LESSEE (Leasee): The party to whom
a lease is granted.
LESSOR: The party who grants a
lease to the lessee.
LIABILITY: Broadly, any legally
enforceable obligation; a responsibility of
one person to another, enforceable in law.
LIABILITY INSURANCE: That
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
LIABILITY LIMITS: The sum or sums
beyond which a liability insurance company
does not protect the insured on a liability
LIEN: A word that indicates an
encumbrance on property, either for
discharge of a duty or the payment of a
debt. When a lien exists, the conditions
attaching to the issue of an insurance
contract require that it be disclosed to the
LIFE INSURANCE: Protection against
the death of the Insured in the form of
payment to a designated beneficiary,
typically a family member or business.
LONG-TERM CARE INSURANCE: A type of
insurance policy that covers the cost of
long-term custodial care in a nursing
facility or at home.
LOCATION CLAUSE: Used in cargo
open covers this limits Underwriters'
liability in any one location.
LOSS OF USE INSURANCE: Insurance
against loss due to the inability to use
property because of its damage or
LOSS OF HIRE INSURANCE: A type of
marine insurance designed to pay for
continuing expenses and loss of profits to
vessel owners while unable to work after a
claim. It provides the means to pay loans,
insurance premiums, key clerical staff,
captain and essential crew, and other
expenses. (Similar to "Business
Interruption" or "Loss of Income" policies.)
LOSS PAYABLE CLAUSE: Clause in an
insurance policy to specifically identify
interested parties (the insured, mortgagees,
trustees, lienholders, etc.).
MALICIOUS DAMAGE CLAUSE: A clause
published by the Institute of London
Underwriters for use in a cargo policy that
is subject to the Institute Cargo Clauses
(1982) B or C. It adds the risks of
malicious acts, vandalism and sabotage to
the cargo policy.
MALPRACTICE INSURANCE: A
professional liability coverage that insures
physicians, lawyers and other specialists
against suits alleging their negligence.
MANAGED CARE: A health plan that
places limits on which treatments and which
doctors, hospitals and other providers a
member can use and still receive full
coverage. Generally, under managed care an
insurer negotiates lower fees with doctors,
hospitals, or laboratories who join in a
network that members of the plan are
encouraged to use. Frequently, members of a
managed care plan can use health care
providers outside their network, but they
must pay a greater share of the fees.
MANUAL RATES: Usually the
published rate for some unit of insurance.
An example is the Workers Compensation
Manual where the rates shown apply to each
$100 of the payroll of the insured, $100
being the unit.
MAR POLICY: A market term for the
form of marine policy used by Lloyd's and
the London company market. It is a basic
contract form to which the conditions agreed
by the insurers subscribing a marine
insurance contract are attached.
MARINE INSURANCE: Insurance
coverage for goods in transit, and for the
vehicles that transport them, over
waterways, over land, and in air.
MARKET VALUE CLAUSE: A provision
that may be used in property damage
insurance form covering some risks which
obligates the insurance company, in the
event of loss, to pay the established cash
selling price of the destroyed or damaged
stock, rather than the actual case value as
provided in the Standard Fire Policy.
MATERIAL FACT: Anything affecting
an insurance contract significant enough to
change the agreement between the insurance
company and the policyholder.
MEDICAID: A federal/state program
that helps pay for health care for the
needy, blind or disabled and for low-income
families with children.
MEDICARE: A federal health
care program for people age 65 and over, and
for the disabled.
MEDIGAP: Insurance coverage sold by
private insurers to supplement federal
insurance benefits and expenses not covered
under the federal Medicare program.
MINIMUM PREMIUM: The smallest
premium which an insurance company will
accept for writing a particular policy or
bond for a designated period.
MISREPRESENTATION: An incorrect
statement made about a material fact that,
if made deliberately and with intent to
deceive, could cause the insurance contract
to become null and void.
MITIGATE: To make less severe;
steps to eliminate further damage after a
MORTGAGE INSURANCE: Life insurance
that pays the balance of a mortgage if the
mortgagor (insured) dies.
MORTGAGEE: The person who has
loaned his money to another and taken the
security of the property in exchange.
MOTOR TRUCK CARGO - OWNER'S FORM:
This form insures the owner of a truck
against loss to his own property while being
transported. It pays for the loss or damage
of cargo for the perils insured against,
regardless of the legal liability.
MOTOR TRUCK CARGO - TRUCKER'S FORM:
This form indemnifies the policyholder, a
trucker, for loss or damage resulting from
his legal liability as a carrier while
transporting the property of others. I does
not insure against any loss for which he is
not legally liable.
MYSTERIOUS DISAPPEARANCE: The
disappearance of insured property in a
mysterious, unexplained manner.
NAMED INSURED: Any person, firm,
or corporation, or any member thereof,
specifically designated by name as
insured(s) in a policy as distinguished
from the others who, though unnamed, are
protected under some circumstances.
NAMED PERIL POLICIES: Named Peril
Policies specify what perils are insured
against, as opposed to so-called all-risk
NEGLIGENCE: Failure to use the
degree of care expected from a reasonable
and prudent person.
NO-FAULT: A system in which each
driver's auto insurance coverage pays for
injuries and damage, no matter who caused
NON-CANCELABLE POLICY: A policy
which the insured has the right to continue
in force by the timely payment of premiums
set forth in the policy, during which period
the insurer has no right to make
unilaterally any change in any provision of
the policy while the policy is in force.
(See also "Guaranteed Renewable Policy".)
NOTICE OF LOSS: Written notice of a
loss to the insurance company as outlined in
the conditions of the insurance policy.
OBLIGEE: Broadly, anyone in whose
favor an obligation runs. This term is most
frequently used in surety bonds, where it
refers to the person, firm or corporation
protected by the bond.
OBLIGOR: Commonly called
principal; one bound by an obligation. Under
a bond, strictly speaking, both the
principal and the surety are obligors.
OCCUPANCY: In insurance, this term
refers to the type and character of the use
of property in question.
OCCURRENCE COVERAGE: A policy
providing liability coverage only for injury
or loss that occurs during the policy
period, regardless of when the claim is
OPEN COVER: An agreement whereby
the Assured undertakes to declare every item
(e.g. shipment, vessel, etc. as appropriate)
that comes within the scope of the cover in
the order in which the risk attaches. The
insurer agrees, at the time of concluding
the contract, to accept all valid
declarations up to the agreed limit for each
declaration. An open cover may be for a
fixed period or always open; subject to a
OVERAGE: An additional premium
charged on a cargo open cover declaration
because the carrying vessel is outside the
scope of the classification clause.
PACKAGE POLICY: An insurance
policy including two or more lines or types
of coverages in the same contract.
PARTIAL LOSS: A loss under an
insurance policy which does not either (1)
completely destroy or render worthless the
insured property; or (2) exhaust the
insurance applying thereto.
PARTICULAR AVERAGE: Accidental
partial loss of the subject matter insured
proximately caused by an insured peril. In a
freight at risk policy the term may be
applied to a claim for loss of freight
following particular average loss of goods.
PAYROLL AUDIT: An examination of
the insured's payroll records by a
representative of the insurance company to
determine the premium due on a policy.
PERIL: A term used in the Marine
Insurance Act (1906) to denote a hazard. The
principle of proximate cause is applied to
an insured peril to determine whether or not
a loss is recoverable. In modern practice
the term "risk" often replaces "peril".
PERSONAL ARTICLES FLOATER:
Provides all risk coverage for valuable
items such as furs, jewelry, etc. formerly
insured under separate contracts.
PERSONAL EFFECTS FLOATER: An
Inland Marine Policy covering worldwide,
except in the insured's domicile, personal
effects usually carried by a tourist.
PERSONAL INJURY: Injury other than
bodily injury arising out of false arrest or
detention, malicious prosecution, wrongful
entry or eviction, libel or slander, or
violation of a person's right to privacy
committed other than in the course of
advertising, publishing, broadcasting,
publishing, or telecasting.
PERSONAL INJURY COVERAGE:
Liability insurance coverage for third party
claims for damages which are other than
physical such as libel, slander, false
PERSONAL INJURY PROTECTION: The
formal name usually given to no-fault
benefits in states that have enacted
mandatory or optional no-fault Automobile
Insurance coverages. PIP usually includes
benefits for medical expenses, loss of work
income, essential services, accidental death
and funeral expenses.
PERSONAL LINES: This term is used
to refer to insurance for individuals and
families such as private passenger
automobile or homeowner insurance.
POLICY: The written statement of a
contract effecting insurance, or
certificates thereof, by whatever name
called and including all causes, riders,
endorsements and papers attached thereto and
made part thereof.
POLICY PERIOD: The period during
which the policy contract affords
PRE-CERTIFICATION AUTHORIZATION: A
cost containment technique which requires
physicians to submit a treatment plan and an
estimated bill prior to providing treatment.
This allows the insurer to evaluate the
appropriateness of the procedures, and lets
the insured and the physician know in
advance which procedures are covered and at
what rates benefits will be paid.
PRE-EXISTING CONDITIONS: A physical
condition of an insured person which existed
prior to the issuance of the policy.
PREMISES: The particular location
of a property or a portion thereof as
designated in a policy.
PREMIUM: The payment for an
insurance policy, usually paid periodically
(annually, semi-annually, quarterly, or
PRIOR DAMAGE: Pre-existing damage
that occurred prior to the loss in question.
PRO-RATA: Cancellation of an
insurance contract by the insurance company,
allowing a policyholder a share of the
premium relating to the remainder of the
time under the contract that bears to the
total contract premium.
PRODUCTS LIABILITY INSURANCE:
Provides protection against claims arising
out of the use, handling or consumption of a
PROFESSIONAL LIABILITY INSURANCE:
Liability insurance to indemnify
professionals, doctors, lawyers, architects,
etc. for the loss or expense resulting from
claim on account of bodily injuries because
of any malpractice, error or mistake
committed or alleged to have been committed
by the insured in his profession.
PROOF OF LOSS: A statement made to
the insurance company under oath setting out
the basis of an insured's claim under the
PROPERTY DAMAGE (LIABILITY) INSURANCE:
Protection against liability for
damage to the property of another not in the
care, custody and control of the insured, as
distinguished from liability for bodily
PROPERTY INSURANCE: Insurance
which indemnifies a person with an interest
in physical property for its loss or the
loss of its income-producing ability.
PROSCRIPTION: Outside of the time
period in which a legal action can be
PROXIMATE CAUSE: The immediate and
effective cause of loss or damage. It is an
unbroken chain of cause and effect between
the occurrence of an insured peril or a
negligent act and resulting injury or
QUALIFIED PLAN: A plan under which
contributions by the employer are allowed as
a deduction from taxable income, and which
provides that the deposits for his
employees' future benefits are not to be
considered as taxable income to them in the
year in which they are made.
RATING BUREAU: An organization
that classifies and promulgates and in some
cases compiles data and measures hazards of
individual risks in terms of rates in a
RECOVERY: Amount recovered from a
third party responsible for a loss on which
a claim has been paid.
REBATE: A reduction of a premium.
REIMBURSEMENT: Payment of an
amount of money related to the amount of
loss to or on behalf of the insured upon the
occurrence of a defined loss.
REINSTATEMENT: (1) Putting a
lapsed policy back in force; (2) The payment
of a claim under some forms of insurance
reduces the principal amount of the policy
by the amount of the claim. Provision is
usually made for a method of reinstating the
policy to its original amount.
REINSURANCE: (1) A contract of
indemnity against liability by which the
insurance company procures another insurance
to insure against loss or liability by
reason of the original insurance; (2)
Insurance by one insurance company of all or
part of a risk accepted by it with another
insurance company which agrees to reimburse
the insurance company for the portion of the
REPLACEMENT CLAUSE: A clause
limiting Underwriters' liability for damage
to machinery cargo.
REPLACEMENT COST: The cash value
representing what it would cost to replace
the specific property without deduction for
REPORTING FORM: Fire or other
direct damage insurance written under a form
of policy that covers fluctuating values of
stocks of merchandise, furniture and
fixtures and improvements by means of
periodic reports submitted to the insurance
company by the insured, with an annual
adjustment of premium on the average value.
RETROACTIVE DATE: Date on a
"claims made" liability policy which
triggers the beginning of insurance
coverage. A retroactive date is not
required. If one is shown on a policy, any
claim made during the policy period will not
be covered if the loss occurred before the
RIDER: An endorsement to an
insurance policy that modifies clauses and
provisions of the policy, adding or
RISK: A fortuity. A term used to
designate an insured of a peril insured
against. It does not embrace inevitable
loss. The term is used to define causes of
loss covered by a policy.
SALVAGE: (1) Property taken over by
an insurance company to reduce its loss; (2)
Award recoverable by salvors under maritime
SALVAGE CHARGES: The award due to
a salvor for services rendered in saving the
SALVAGE LOSS: Occurs when the
Underwriter agrees to settle a cargo claim
by paying the difference between the insured
value and the proceeds realized by selling
the damaged goods.
SCHEDULE: (1) A list of specified
amounts payable for, usually, surgical
procedures, dismemberments, ancillary
expenses or the like in Health Insurance
policies; (2) The list of individual items
covered under one policy as the various
buildings or animals and other property in
property insurance; (3) In Marine policies,
a list attached to a slip, open cover,
policy or other document, usually detailing
the rates of premium for various voyages,
interests and risks.
SCHEDULE OF LOSS: Notice completed
by the insured documenting loss or damage to
contents, personal property and/or stock.
SEAWORTHINESS WARRANTY: There is
an implied warranty in every voyage policy
that the ship must be seaworthy at the
commencement of the insured voyage or, if
the voyage is carried out in stages, at the
commencement of each stage of the voyage. To
be seaworthy, the ship must be reasonably
fit in all respects to encounter the
ordinary perils of the contemplated voyage,
property crewed, fuelled and provisioned,
and with all her equipment in proper working
order. Cargo policies waive breach of the
warranty, except where the Assured or their
servants are privy to the unseaworthiness.
Breach of the warranty is not excused in a
hull voyage policy, literal compliance
therewith being required. Although there is
no warranty of seaworthiness in a hull time
policy, claims arising from unseaworthiness
may be prejudiced if the ship sails in an
unseaworthy condition with the knowledge of
SECURITY: The Underwriters
subscribing a risk. The Insurers.
SHORT-RATE: Cancellation of an
insurance contract at the request of the
policyholder with a refund of premiums to
the policyholder less than would be given
under pro-rata consideration.
SOLVENCY: Sufficient assets and
income. It is the primary responsibility of
a state's insurance department is to monitor
insurance companies licensed to transact
business within their state and make certain
that they remain solvent and have the
ability to pay the claims of their
SPECIFIED DISEASE INSURANCE: A
policy which provides stated benefits,
usually of large amounts, toward the expense
of treatment of the disease or diseases
named in the policy.
STOP LOSS: (1) Any provision in a
policy designed to cut off the insurance
company's loss at a given point. Aggregate
benefits and maximum benefits are an
example; (2) A type of reinsurance designed
to transfer the loss from the ceding company
to the reinsurer at a given point.
SUBROGATION: The legal process by
which an insurance company seeks from a
third party who may have caused the loss,
recovery of the amount paid to the insured.
SUBROGATION WAIVER: A waiver by the
named insured giving up any right of
recovery against another party. Normally an
insurance policy requires that subrogation
(recovery) rights be preserved.
SUE AND LABOR: Expenses incurred
by the Assured or their representatives with
the intention of preventing or minimizing a
loss for which the Underwriter would have
been liable. They do not include expenses
incurred in general average or salvage acts;
these being recoverable under the policy
only as part of the Underwriters' liability
for contribution to general average or
salvage, if any. Sue and labor charges are
recoverable under a policy that incorporates
a sue and labor clause (SG policy), or in
accordance with the wording of the policy
(e.g. under the "duty of the Assured" clause
attached to a MAR policy).
SURETY: (1) A term loosely used to
describe the business or suretyship or
bonds. Suretyship is an arrangement whereby
one party becomes answerable to a third
party for the acts of neglect of a second
party; (2) The party in a surety arrangement
who holds himself responsible to one person
for the acts of another.
SURETY BOND: A bond in which the
surety agrees to answer to the obligee for
the non-performance of the principal (known
as the obligor).
TAIL: This term has been used to
describe both the exposure that exists after
expiration of a policy and the coverage that
may be purchased to cover that exposure. On
"occurrence" forms a claims tail may extend
for years after policy expiration, and the
losses may be covered. On "claims made"
forms tail coverage may be purchased to
extend the period for reporting covered
claims beyond the normal policy period.
TERM INSURANCE: Life insurance
issued for a stated temporary period of
TITLE INSURANCE: Indemnifies the
owner of real estate in the event clear
ownership of property is challenged by
discovery of faults in the title.
TO PAY AS CARGO: Used in an
ancillary insurances relating to the cargo
(e.g. increased value) when the Assured is
not required to show evidence of loss or
interest and can claim on the policy if he
can show that a corresponding loss has been
settled on the main cargo policy.
TOTAL LOSS: This can be actual
total loss or constructive total loss, where
the cost of damage repair exceeds the value
of the property insured.
TRANSIT CLAUSE: A clause in the
Institute Cargo Clauses, specifying the
attachment and termination of cover.
TRUCKMENS LIABILITY FORM: See
Motor Truck Cargo Policy
UMBRELLA LIABILITY POLICY: A
liability policy designed to provide
liability protection above and beyond that
provided by standard liability contracts.
UNDER-INSURANCE: A condition in
which not enough insurance is carried to
cover the insurable value, and, especially,
to satisfy a coinsurance clause.
UNDERWRITER: (1) A person trained
in evaluating risks and determining the
rates and coverages that will be used for
them; (2) An agent, especially a life
insurance agent, who might qualify as a
UNDERWRITING: The process of
examining, accepting, or rejecting insurance
risks, and classifying those selected in
order to charge the proper premium for each.
UNINSURED MOTORIST COVERAGE:
Endorsement to a personal automobile policy
that covers an insured involved in a
collision with a driver who does not have
UNIVERSAL LIFE INSURANCE: A
flexible premium policy that combines
protection against premature death with a
savings account that typically earns a money
market rate of interest.
VALUABLE PAPERS AND RECORDS INSURANCE:
An Inland Marine or burglary insurance
coverage providing for the replacement of
valuable papers, records and forms.
VOID POLICY: One which is
inadmissible as evidence in a court of law
(e.g. P.P.I. policy).
WAITING PERIOD: A period of time
between the beginning of a disability and
the date benefits begin.
WAIVE: To forego; to refrain from
insisting upon application of an insurance
deductible under specific conditions.
WAIVER CLAUSE: A clause which
entitles both Underwriter and Assured to
take measures to prevent or reduce loss
without prejudice to the rights of either
WARRANTY: A statement made on an
application for insurance that is warranted
to be true in all respects. If untrue in any
respect, even though the untruth may not
have been known to the person giving the
warranty, the contract may be voided whether
or not the untruth or inexactness is
material to the risk.
WATERBORNE AGREEMENT: A market
understanding whereby Underwriters cover
goods against war risks only whilst they are
on the overseas vessel. This rule is relaxed
only in the case of goods in a transshipping
port for a short period awaiting onward
WHOLE LIFE INSURANCE: Life
insurance payable to a beneficiary at the
time of death of the insured, whenever that
WITHOUT BENEFIT OF SALVAGE: A term
in a marine insurance policy, whereby the
Underwriters forgo their subrogation rights.
A policy incorporating such a term is deemed
to be a gambling policy in law, and is
therefore invalid in a court of law.
WITHOUT PREJUDICE: The claim is
paid on this occasion, although the
Underwriter feels it does not attach to the
policy, but this action must not be treated
as a precedent for future similar claims.
WORKERS COMPENSATION: (1) A
schedule of benefits payable to an employee
for injury, disability, dismemberment, or
death as a result of occupational hazard.
The payments are a liability of an employer.
(2) Insurance agreeing to pay the Workers
Compensation benefits required by law on
behalf of the employer.