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Business Insurance Glossary
A B C D E F
G H I J K L
M N O P Q R
S T U V W X
Y Z
Accounts Receivable Coverage
This coverage provides protection for the
following losses:
All sums due you from customers, providing you
are unable to effect collection thereof as a
direct result of loss or damage to records of
accounts receivable.
Interest charges on any loan to offset impaired
collections pending repayment of such sums made
uncollectable by such loss or damage.
Collection expense in excess of normal
collection cost made necessary because of such
loss or damage.
Other expense, when reasonably incurred by you
in re-establishing records of accounts
receivable following loss or damage.
Actual Cash Value (ACV)
"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 Insured
An individual or entity that is not
automatically included as an insured under the
policy of another, but for whom the named
insured's policy provides a certain degree of
protection. An endorsement is typically required
to effect additional insured status. The named
insured's impetus for providing additional
insured status to others may be a desire to
protect the other party because of a close
relationship with that party (e.g., employees or
members of an insured club) or to comply with a
contractual agreement requiring the named
insured to do so (e.g., customers or owners of
property leased by the named insured).
Additional Named Insured
An individual or entity, other than the first
named insured, identified as an insured in the
policy declarations or an addendum to the policy
declarations.
An individual or entity who is added to a policy
with the status of named insured after the
policy is written. Such an individual or entity
would have the same rights and responsibilities
as an individual or entity named as an insured
in the policy declarations (other than those
rights and responsibilities reserved to the
first named insured). In this sense the term can
be contrasted with additional insured, an
individual or entity added to a policy as an
insured but not as a named insured. The term
additional named insured has not acquired a
uniformly agreed-upon meaning within the
insurance industry, and use of the term in the
two different senses defined above often
produces confusion in requests for additional
insured status between contracting parties.
Additions and Alterations Coverage
Additions and Alterations coverage protects any
additions, alterations, and improvements you
make to your unit, for up to 10% of your
contents limit. This coverage can be increased.
Advertising Injury Liability Coverage
"Advertising Injury" means injury rising out of
an offense committed in the course of your
advertising activities, if such injury rises out
of libel, slander, defamation, violation of
right of privacy, piracy, unfair competition or
infringement of copyright, title or slogan.
Aggregate
A limit in an insurance policy stipulating the
most it will pay for all covered losses
sustained during a specified period of time,
usually one year. Aggregate limits are commonly
included in liability policies. While not often
used in property insurance, aggregates are
sometimes included with respect to certain
catastrophic exposures, e.g., earthquake and
flood.
The dollar amount of reinsurance coverage during
one specified period, usually 12 months, for all
reinsurance losses sustained under a treaty
during such period.
Agreed Amount Endorsement
This endorsement is an agreement made by the
insurance company wherein it waives the
coinsurance clause on the specified property. As
long as this endorsement is in effect, there
would be no coinsurance penalty at the time of a
claim.
By combining an Agreed Amount Endorsement with a
Replacement Cost Endorsement (see separate
explanation), you can obtain an unusually high
quality of insurance coverage.
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.
Assigned Risk
A method to provide insurance to the
uninsurable. In mandatory insurance states,
everyone must have insurance regardless of their
risk or record. These states require that each
company writing insurance in their state must
take a number of clients that they would not
insure otherwise.
Automobile Coverage
Any insurance pertaining to the use or ownership
of a vehicle. Common coverages are liability,
physical damage and personal injury.
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Bailee Coverage
Inland marine coverage on property entrusted to
the insured for storage, repair, or servicing.
It is typically purchased by businesses such as
dry cleaners, jewelers, repairers, furriers,
etc.
Basic Limits
The minimum limits of liability as required by
state or local law.
Beneficial Interest
Denotes someone who is not necessarily the
insured on a property policy but has a financial
interest in the property (i.e. they would
benefit from any insurance on the property).
Binder
A binder is a legal agreement that serves to
effect 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
Blanket Coverage
For property insurance, a blanket sets a single
limit (maximum payout) for multiple buildings or
risks. For health insurance, a blanket covers an
entire group for a list of coverages (i.e.
medical, dental, etc.).
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.
Boiler and Machinery Coverage
This form of insurance provides mechanical
breakdown coverage generally not available under
any other insurance policy. A Boiler and
Machinery policy can protect an insured against
the effects of catastrophic property loss, such
as steam boiler explosion or an expensive
breakdown of machinery and equipment.
But it's not just the physical damage caused by
the explosion or breakdown that's of concern.
While repairs are being made, valuable time and
profits are lost. Business Interruption coverage
protects against this. Often Extra Expense
coverage is required to keep the business in
operation regardless of cost. Consequential
Damage and Refrigeration Interruption insurance
protect against spoilage as the result of a
breakdown. Many times these business
interruption, extra expense and spoilage losses
can be much more extensive than the damage to
the equipment itself.
Equally important is the very valuable
inspection service that Boiler and Machinery
insurance can provide. Not only does this
service satisfy most jurisdictional inspection
requirements, but it also can benefit the
insured by providing sound loss control
recommendations that can help assure efficient
operation and longer equipment life.
Virtually every commercial business has some
type of Boiler and Machinery insurance exposure.
Keep in mind that mechanical breakdown coverage
encompasses much more than just boilers and
pressure vessels. It also can include
refrigeration equipment, air conditioning
equipment, various types of piping, turbines,
engines, pumps, compressors, blowers, gearing,
shafting, electric motors, generators,
transformers and assorted other types of
mechanical and electrical equipment. In fact,
many policies are written for insureds who do
not own or operate boilers or pressure vessels,
but yet have sizable mechanical and electrical
exposures.
Bond
A three part contract in which one party
guarantees the performance, act or behavior of
another party for a third party. The two most
common types of bonds are Surety and Fidelity.
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 Auto Coverage
Designed to provide a standard method of
insuring vehicles other than private passenger
automobiles.
Business Interruption Coverage
This form of insurance provides loss of income
coverage (i.e. "disability income") for your
business by replacing your operating income
during the period when damage to the premises or
other property prevents income from being
earned.
It is by means of your operating income that
your business meets its expenses of payroll,
light, heat, advertising, telephone service,
etc., and from which your profit is derived. If
you suffer a business interruption and have to
close for several months or operate at a reduced
pace because of fire or other perils covered by
your Earnings insurance, this income will cease
or be reduced.
For the purpose of this insurance coverage,
"earnings" are defined as the actual loss
sustained by the insured as a direct result of
business interruption necessitated by damage or
destruction of real or personal property. The
damage or loss must be caused by the insured
perils
Furthermore, "business income" is defined as the
sum of total net profit, payroll expense, taxes,
interest, rents, and all other operating
expenses earned by the business.
The amount of coverage your Earnings insurance
provides is established on the basis of either
amount of insurance or actual loss sustained for
each 30-day period of necessary business
interruption caused by damage or loss from
covered perils. There are several ways to set up
Business Interruption depending upon your
particular business. Monthly limitations,
coinsurance, maximum time period to be paid,
etc.
In addition to Business Interruption insurance,
it is also advisable to carry Extra Expense
insurance (see separate coverage explanation).
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.
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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.
Cargo Insurance
Cargo insurance is another name for inland
marine insurance which covers 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."
Certificate of Insurance
An official document created by an insurance
carrier or agent to prove insurance coverage to
a third party.
Claim
The formal request by a policy holder or
claimant to be paid under the terms of the
insurance policy.
Claims Made
A method of providing liability insurance in
which the insurer agrees to cover all claims
asserted against the insured during a specified
date period regardless of when the claim
occurred. All claims-made policies have a
"retro" date which specifies the beginning date
for claims to be considered.
Coinsurance
Coinsurance is an arrangement by which the
insured, in consideration of a reduced rate,
agrees to carry an amount of insurance equal to
a percentage of the total value of the property
insured.
An example is if you have guaranteed to carry
insurance up to 80% or 90% of the value of your
building and/or contents, whatever the case may
be. If you don't, the company pays claims only
in proportion to the amount of coverage you do
carry.
Collision Coverage
This covers loss to the insured person's own
vehicle caused by its collision with another
vehicle or object.
Commercial General Liability Coverage (CGL)
An all encompassing type of insurance policy
which covers all liability exposures for all
locations and causes of loss except those
specifically excluded in the policy.
Commercial Multiperil
Describes a type of package policy which covers
more than one peril or cause of loss in a single
policy. Should not be confused with a commercial
package which provides several types coverages
in a single policy.
Commercial Package Policy (CPP)
A single insurance policy which combines several
types of insurance coverages. A typical CPP
might contain coverage for property, liability,
crime, auto, inland marine and boiler and
machinery.
Commercial Property Coverage
Protects against physical damage to buildings,
contents, stock, and equipment. The terms and
conditions of coverage are determined by the
limit of insurance chosen by the policyholder.
The limit is based on the items that the
policyholder wishes to insure; i.e., buildings,
stock, machinery, valuable papers, etc. Business
Interruption and Extra Expense Coverage can also
be provided under a Commercial Property policy.
Business Interruption protects the policyholder
against lost profits as a result of direct
damage to the facility. Extra Expense provides
payments for those extraordinary expenses
necessary to continue operations after physical
damage to the policyholder's facility.
Completed Operations Liability Coverage
This form of liability insurance provides
coverage for bodily injury and property damage
rising from completed or abandoned operations,
provided the incident occurs away from premises
owned or rented by the insured.
Operations are deemed completed at the earliest
of the following items:
When all operations to be performed by or on
behalf of the insured under contract have been
completed.
When all operations to be performed by or on
behalf of the insured at the site of the
operations have been completed.
When the portion of work out of which injury or
damage rises has been put to its intended use by
a party other than the contractor or
subcontractor.
Comprehensive Automobile Coverage
Owned Automobiles
Covers liability rising out of the ownership,
maintenance or use of automobiles.
Hired Automobiles
Covers liability for the use of hired
automobiles in your business.
Non-Owned Automobiles
Covers liability for the use of non-owned
automobiles in your business. An example would
be an employee using his/her own car on an
errand for you.
Uninsured Motorists
Protects insureds who are not contributorily
negligent against bodily injury caused by
negligent uninsured motorists.
Comprehensive
Pays for damage to or the loss of automobiles
from perils other than collision. A deductible
applies.
Collision
Pays for damage to or the loss of automobiles
from upset or collision with another object. A
deductible applies.
Comprehensive General Liability Coverage
Under this form of insurance and regarding a
covered occurrence, the company will pay all
sums the insured becomes legally obligated to
pay as damages due to:
Bodily injury (Coverage A)
Property damage (Coverage B)
The insurance company has the right to defend
any suit against the insured seeking damages for
bodily injury or property damage, even if any of
the allegations of suit are groundless, false,
or fraudulent, and to make such investigation
and settlement of any claim or suit as it deems
expedient. However, the company is not obligated
to pay any claim or judgment or to defend any
suit after the applicable limit of the company's
liability has been exhausted by payments of
judgments or settlements.
Consequential Loss or Damage
Consequential loss or damage -- as opposed to
direct loss or damage -- is indirect loss or
damage resulting from loss or damage caused by a
covered peril, such as fire or windstorm. In the
case of loss caused where windstorm is a covered
peril, if a tree is blown down and cuts
electricity used to power a freezer and the food
in the freezer spoils, if the insurance policy
extends coverage for consequential loss or
damage then the food spoilage would be a covered
loss. Business Interruption insurance, extends
consequential loss or damage coverage for such
items as extra expenses, rental value, profits
and commissions, etc.
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 servants. 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
classed as 'contents'. Certain types of property
are excluded. The cover applies principally to
contents actually inside the home, although
there is some cover 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.
Contractors' Liability Coverage
Premises/Operations
The "premises" portion of your liability
insurance provides for payment on your behalf of
all sums you become legally obligated to pay as
damages resulting from bodily injury and/or
property damage caused by an insured peril and
rising out of the ownership, maintenance, or use
of premises and your operations in progress.
The "operations" portion of your liability
insurance covers operations in progress and is
intended for situations where your principal
business operations are performed away from your
premises.
Completed Operations
This portion of your liability insurance covers
you for possible liability for bodily injury
and/or property damage after your work is
complete and you have left the job site.
Contractors' Protective Liability Coverage
This insurance coverage provides for payment on
behalf of the insured of all damages the insured
becomes legally obligated to pay due to bodily
injury or property damage caused by an
occurrence rising from the following:
Operations performed for the named insured by
independent contractors.
Acts or omissions of the named insured in
connection with his/her general supervision of
such operations.
This does not include maintenance and repair at
premises owned by or rented to the named
insured, or structural alterations at such
premises that do not involve changing the size
of or moving buildings or other structures.
Contractual Liability Coverage
It is common in construction and other
agreements (written or oral) for one party to
"assume" the liability of another. This is
sometimes referred to as a "hold harmless"
agreement. The extent to which one holds another
harmless varies from contract to contract, job
to job, etc.
To assume the liability of another, regardless
of extent, is a voluntary undertaking which
increases your exposure to loss. A standard
Commercial General Liability policy does cover
this additional exposure subject to certain
exclusions.
Crime Insurance
Crime Insurance pays an owner for the loss of
property due to its wrongful taking by someone
else through employee dishonesty, burglary,
robbery, or theft. There are many different
types of crime coverage available, including
coverage for computer theft and fraud.
Cross Liability Coverage
In the event of claim by one insured for which
another insured covered by the same policy may
be held liable, this endorsement covers the
insured against whom the claim is made in the
same manner as if separate policies had been
issued. However, it does not operate to increase
the insurance company's overall limit of
liability.
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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
claim amount.
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
Drive Other Car Coverage
Coverage applicable to employees or executives
of a company or any other person who is supplied
a company vehicle, but who does not own a
personal vehicle, thereby not having personal
automobile coverage. An endorsement may be added
to the automobile policy of the company that
furnishes the automobile, giving protection
while the named individual or a member of his
family is driving a car borrowed from a third
party (other than the vehicle named in the
policy). Individuals who are owners of the
company qualify for the "individual named
insured" endorsement, which includes family
coverage. The drive other car coverage is
usually added at little additional premium
charge.
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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.
Electronic Data Processing (EDP) Coverage
A Standard property insurance policy leaves
something to be desired in addressing special
EDP-related exposures. Electronic data
processing equipment and its software is
particularly susceptible to damage from
electrical or magnetic disturbance and changes
in temperature or humidity -- perils which are
excluded in a standard "special" perils property
policy. Except for prepackaged software
programs, which are typically covered on an
actual cash value basis, coverage for programs
and data in a standard property policy is
essentially limited to replacement with blank
tapes or diskettes plus transcribing expense.
Finally business interruption coverage in
connection with damaged EDP Media {not
equipment} is limited to 60 days from the date
of loss or the time when the other damaged
property is repaired, whichever is longer.
Therefore, if the building repairs are complete,
but normal operations cannot resume because
replacement computer programs, data or media are
not readily available, an uninsured business
interruption loss may result.
The best way to resolve these coverage
inadequacies for EDP exposures is to buy a
special EDP policy. Typically, EDP policies
provide "special" peril coverage similar to that
provided by "special" property forms, PLUS
coverage for all electrical and magnetic damage,
mechanical breakdown and often temperature and
humidity changes as well. Some insurers include
these perils in the basic form, while others
make them available by endorsement for an
additional premium. Usually these broader
coverages are subject to a higher deductible as
well. Valuation can be on either a replacement
cost or actual cash value basis, and coverage
may be available on a blanket as well as a
scheduled basis. Media coverage includes the
cost to reconstruct software developed in-house
{subject to the limit of liability selected for
the coverage}, if necessary.
Perhaps most importantly, an EDP policy will
respond appropriately to extra expense or income
loss from the loss of EDP equipment, programs
and data, provided that these coverage options
in the policy have been elected and adequate
limits of liability have been established.
Employee Benefits Plan Liability Coverage
Protects the insured employer against claims by
employees or former employees resulting from
negligent acts or omissions in the
administration of the insured's employee
benefits programs.
The term "employee benefits programs" is defined
to include group life insurance and group
accident and/or health insurance; profit sharing
plans; employee stock subscription plans; and
workers' compensation, unemployment insurance,
social security benefits, disability benefits,
etc.
Coverage is intended to extend to the
"administration" of these plans, including
counseling employees, interpreting employee
benefits programs, handling records,
enrolling/terminating/cancelling employees in
specified plans on a timely basis, etc.
Employee Dishonesty Coverage
Employee dishonesty coverage protects an
employer from financial loss due to the
fraudulent activities of one or more employees.
The coverage includes protection for loss of
money, securities, and other property of the
insured.
Some scheduled policies are still available, but
the majority are written on a blanket basis.
This provides coverage for all employees,
subject to the policy definitions.
The limit of liability is "per loss" and is
applied on an "occurrence" basis. All acts
involving the same employee or group of
employees is considered one occurrence.
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.
Equipment Floater
Covers various kinds of equipment against all
potential risks.
Errors & Omissions Coverage
Coverage for liability resulting from errors or
omissions in the performance of professional
duties. Applicable as a general rule to
professional business activities such as
banking, accounting, law, insurance and real
estate.
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.
Extra Expense Coverage
If your building was rendered untenantable by
fire or any other insured peril, it would
probably be necessary to secure other quarters
to continue your business operations. However,
the use of such buildings would undoubtedly
involve many extra expenses, such as rent,
installation of telephones, etc. Extra Expense
insurance covers such expenditures over and
above your normal monthly expenses.
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Fair Plan
Designed to provide "fair access to insurance"
for property owners in deteriorating urban areas
who have difficulty buying insurance. It assures
the owner they will receive a property
inspection and will be provided insurance as
long as the property is properly maintained and
and improvements recommended to make the
property more insurable have been carried out.
Fidelity Bond
Insures an employer against acts of employee
dishonesty such as theft or embezzlement.
Fiduciary Liability Coverage
Fiduciary liability, also known as pension trust
liability, provides coverage for loss that the
insured becomes legally liable to pay because of
a claim made against the insured for any alleged
wrongful act by such insured or by any other
person for whom the insured is legally
responsible. It also covers the defense costs in
connection with a covered claim. The policy is
written on a claims made form.
A wrongful act includes any violation of the
responsibilities, obligations, or duties imposed
on fiduciaries by the Employee Retirement Income
Security Act (ERISA), as well as acts, errors,
or omissions in the performance of the duties of
the plan administrator.
The ERISA definition of a fiduciary is very
broad. It is any person so named in the plan or
any person who exercises any discretionary
authority or control with respect to the
management or administration of the plan or its
assets.
The rules and regulations of ERISA include
strict guidelines for fiduciaries. Failure to
comply can result in lawsuits from employees,
former employees, and beneficiaries, as well as
the Secretary of Labor, Treasury Department, and
Pension Benefit Guarantee Corp. The sponsor
corporation as well as the individual
fiduciaries are at risk.
ERISA also has a broad definition of what is
considered an employee benefit plan. It includes
any plan, fund, or program established or
maintained for the purpose of providing employee
benefits to its participants or beneficiaries.
Under a fiduciary liability policy, the insured
includes the following:
The sponsor organization
The plan(s)
Any natural person in his/her capacity as
fiduciary or administrator of the plan(s)
Most fiduciaries are unaware of their personal
financial risk or that of the sponsor
organization. Fiduciary liability coverage
provides one way of reducing the risk and
providing protection for the sponsor
organization and individual fiduciaries.
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.
Fire Legal Liability Coverage
Coverage needed if you occupy leased or rented
property for which you could be held legally
liable for damage to the property due to fire or
explosion.
First Dollar Coverage
An insurance policy that doesn't have a
deductible and begins paying on the first dollar
of loss.
Floater
An insurance policy that "floats around" with
whatever is insured regardless of where.
Forgery or Alteration Coverage
This type of insurance covers loss sustained
through forgery or alteration of outgoing
negotiable instruments made or drawn by you, or
drawn on your account(s), or made or drawn by
one acting as your agent. This includes loss
caused by any of the following:
Checks or drafts made or drawn in your name,
payable to a fictitious entity.
Checks or drafts, including payroll checks,
executed through forged endorsements.
Alteration of the amount of a check or draft.
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Garagekeepers Legal Liability
Provides coverage to owners of storage garages,
parking lots, etc. for liability as bailees with
respect to damage to automobiles left in their
custody. Coverage is contingent upon
establishing liability on the part of the
insured.
General Aggregate Limit
The total amount that will ever be paid by an
insurance policy regardless of the number of
claims made against it.
Glass Coverage
Covers the replacement of broken glass in doors
and windows. Usually includes temporary measures
to secure a property in the event of glass
breakage.
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Habitational Risk
A property used for shelter.
Host Liquor Liability Coverage
Protects the hosts of business or social
functions where alcoholic beverages are sold or
served.
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Indemnify
To reimburse or otherwise pay for an incurred
loss.
Indemnity Bond
A contract to pay or reimburse a third party for
failure to perform or fulfill contractual
obligations named in the bond.
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.
Inflation Guard Coverage
This coverage extension automatically increases
the building amounts of insurance by 2% per
quarter. This is done at no additional cost and
is an attempt to keep pace with inflation.
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."
Insurance
A contract by which one undertakes to indemnify
another or to pay a specified amount upon
determinable contingencies.
Insurance Audit
Sometimes factors that enter into determining
appropriate premiums for insurance coverage
can't be known in advance; therefore, accurate
premiums for the coverage provided can't be
billed by the insurance carrier. This often is
true in the case of Worker's Compensation and
Product Liability insurance, where such things
as payroll and sales can't be determined ahead
of time. An audit serves as an examination of
the insured's records after the fact to adjust
the initial premium billed to reflect the actual
coverage.
Insurance Fraud
Insurance fraud is any act or omission with the
purpose of illegally obtaining a property and
casualty insurance benefit. This definition
encompasses the full range of fraudulent acts,
from completely fabricated claims, to inflation
or padding of legitimate claims, to false
statements on insurance applications, to
internal fraud.
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Jeweler's Block Coverage
Covered Property
This insurance covers the insured's stock,
property left with the insured for repair or
other purposes, and the insured's interest in
and legal liability for property on memorandum
or consignment from others in the jewelry trade.
Covered Perils
The policy is written on a "special" form. Some
of the more prevalent perils covered are fire,
open stock burglary, inside and outside holdup,
safe burglary, theft, pilferage, kidnapping,
shoplifting, window smashing, damage or loss of
salesman's samples in transit, loss in transit
by registered mail, water damage, sprinkler
leakage, and smoke damage.
Exclusions
The principal exclusions are loss caused by war
or nuclear reaction; loss or shortage disclosed
on taking inventory; loss from unattended
vehicle other than common carrier vehicle; loss
during shipment other than by registered mail or
under receipt by armored car service, passenger
bus line, or customer parcel delivery service;
loss at insured's premises caused by earthquake
or flood; loss caused by dishonesty of anyone to
whom property is entrusted; damage sustained
while property is being worked on; and damage
sustained while property is being worn, except
watches worn solely for the purpose of
adjustment.
Jewelry Floater
An insurance policy which covers jewelry against
loss or damage wherever it might be.
Joint Loss Agreement
This endorsement is intended to facilitate
payment of insurance proceeds when there are two
different carriers for the property and the
boiler and machinery coverage and there is a
disagreement as to the amount of loss to be paid
by each carrier.
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Key Employee Insurance
An insurance purchased by a company or
organization on key employees and naming the
company as beneficiary. This type of policy is
designed to lessen the financial hardship to a
company should a key employee die, become
permanently disabled or die.
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Lapse
Typically used in life insurance to indicate the
termination of a policy.
Law Exclusion
A statement in most property policies which
specifies that changes in law or ordinance are
not valid perils or causes of loss. This means
if your property is destroyed or damaged in the
course of enforcing a law, you're not covered.
Law coverage is available separately.
Leasehold Interest Coverage
Leasehold Interest insurance provides coverage
for a tenant in the event his or her lease is
terminated. The lease may be terminated due to
(1) a clause in the lease specifying that the
lease is terminated in the event of property
damage causing the premises to be unavailable
for tenancy, or (2) condemnation of the leased
premises. It is a form of "time element"
coverage that serves to provide coverage for the
difference between the old rental and a new,
likely more expensive rental.
Liability Coverage
Insurance for your screw ups. 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.
Liquor Liability Coverage
Liquor liability insurance provides coverage for
bodily injury or property damage for which an
insured may be held liable by reason of the
following:
Causing or contributing to the intoxication of
any person;
Furnishing alcoholic beverages to a person under
the legal drinking age or under the influence of
alcohol; or
Violating any statute, ordinance, or regulation
relating to the sale, gift, distribution, or use
of alcoholic beverages.
This coverage applies only if the insured is
involved in the following activities:
Manufacturing, selling, or distributing
alcoholic beverages;
Serving or furnishing alcoholic beverages for a
charge, whether or not such activity requires a
license or is for the purpose of financial gain
or livelihood; or
Serving or furnishing alcoholic beverages
without a charge, if a license is required for
such activity.
Loss Control
Inspection and engineering work done to help
remove potential causes of loss. Loss prevention
is also referred to as safety engineering,
accident prevention, accident control, loss
control or loss prevention.
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Machinery Breakdown Coverage
This form of insurance provides mechanical
breakdown coverage generally not available under
any other insurance policy. A Boiler and
Machinery policy can protect an insured against
the effects of catastrophic property loss, such
as steam boiler explosion or an expensive
breakdown of machinery and equipment.
Manufacturing Risk
A property used for the processing or
manufacturing of goods.
Maximum Possible Loss (MPL)
A formal estimate of the maximum dollar amount
at risk by the company or companies providing an
insurance policy.
Mercantile Risk
A property used in the business of selling
merchandise.
Multi-Line Insurance
An insurance policy which provides more than one
coverage in a single policy. Also known as a
Package Policy.
Multi-Peril Insurance
An insurance policy that insures more than one
peril or cause of loss. An All-Risk policy is an
example of a multi-peril policy. This is not the
same as a Multi-Line policy which includes more
than one type of coverage
Mutual Insurance Company
An insurance carrier or provider which is owned
exclusively by its insureds. A mutual insurance
company has no stock. Any operating profit is
paid to their insureds in the form of a premium
rebate.
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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.
Non-Owned and Hired Car Coverage
Non-owned and hired car coverage is for policies
written with limits of liability of $1 million
or more. It provides coverage for rental or
borrowed autos as long as the insured does not
own any private passenger vehicles, pick-up,
panel truck or van and the use does not exceed
30 days.
Nonadmitted Carrier
An insurer not licensed to write insurance in a
specific state.
Nonrenewal
When an insurance company decides it will not
provide you insurance anymore.
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Occurrence (CGL)
This term means an accident, including
continuous or repeated exposure to conditions,
which results in bodily injury or property
damage neither expected nor intended from the
standpoint of the insured.
Occurrence Policy
A type of liability policy in which a insurance
provider is liable for any claim which occurred
during the policy period regardless of how far
in to the past it occurred. This is the
traditional type of liability policy but has
lost favor because of lawsuits being brought
years after the fact. Large liability risks are
typically covered by claims-made policies which
are responsible only for claims submitted during
the covered policy period.
Ordinance Exclusion
A statement in most property policies which
specifies that changes in law or ordinance are
not valid perils or causes of loss. This means
if your property is destroyed or damaged in the
course of enforcing a law, you're not covered.
Ordinance coverage is available separately.
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 with
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.
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Package Policy
A single insurance policy which combines many
different types of coverages resulting in a
lower price than if each were purchased
individually. Business owners packages typically
combine automobile, liability and property
coverages in to a single insurance policy.
Peril
The cause of a loss. Examples of perils are
fire, wind, an accident and acts of vandalism.
Physical Damage Coverage
Insurance against damage to tangible property.
Automobile physical damage covers damage to your
vehicle.
Plate Glass Coverage
This insurance coverage provides "special"
protection, except for the perils of war,
nuclear reaction, and fire. (Fire is covered
under the building policy.)
This coverage is for full replacement cost and
covers the expense of repairing frames,
installing temporary plates, or boarding up
openings.
Policy
A formal contract outlining the terms and
conditions of the insurance provided by an
insurance carrier.
Pollutants Cleanup and Removal Coverage
This is an aggregate first party coverage that
applies to your expense in extracting
"pollutants" from land or water at your
location, if the release of the pollutants is
caused by or results from a covered loss.
Pollution Legal Liability Coverage
Coverages
Pays on your behalf all sums you are legally
obligated to pay as a result of emission,
discharge, release, or escape of any
contaminants, irritants, or pollutants into or
on land, the atmosphere, or any water course or
body of water, provided this results in
"environmental damage."
Additionally pays to reimburse your expense for
reasonable and necessary cleanup costs incurred
in the discharge of a legal obligation validly
imposed through governmental action, provided
such expense is incurred because of
"environmental damage."
Pays for defense of any claim or suit that is
the subject of this insurance.
Coverage Response
"Claims made" coverage response (i.e., responds
only to claims first made during the policy
period and only for incidents that have occurred
after the effective date of this coverage).
Pollution
"Environmental damage" is defined in the policy
as "the injurious presence in or on land, the
atmosphere, or any water course or body of water
of solid, liquid, gaseous, or thermal
contaminants, irritants, or pollutants."
Premium
The amount you are asked to pay for an insurance
policy.
Products Liability Coverage
The liability for bodily injury or property
damage incurred by a merchant or manufacturer as
a consequence of some defect in the product sold
or manufacturered or the liability incurred by a
contractor after he has completed a job as a
result of improperly performed work. The latter
described part of products liability is called
Completed Operations
Professional Liability Coverage
Consultants and companies providing advice and
services of any kind have exposures that are not
usually insured by a Commercial General
Liability policy. Among the more common types of
organizations that have professional exposure
are accountants, lawyers, computer consulting
firms, investment advisors, insurance agents,
data processing service firms, publishers,
third-party administrators, teachers and anyone
providing consulting services. A variety of
Professional Liability and Errors & Omissions
Liability policies are designed to protect
individuals and companies for claims alleging
negligence in the providing of specialized
services.
Property Coverage
Protects against loss of or damage to buildings
and personal property
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 and climate.
Protective Liability Coverage
Protects against claims arising from a secondary
cause such as a business being sued due to the
actions of an employee.
Punitive Damages
Punitive damages are awarded in civil law suits
to discourage intentional wrongdoing, wanton and
reckless misconduct and outrageous behavior. The
majority of courts in the United States,
including those of New York hold that punitive
damages are not compensation for injury, but,
instead, are private fines levied by civil
juries to punish reprehensible conduct and to
deter its future occurrence.
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Reinstatement
This has two meanings:
- The restoration or continuation of an
insurance policy that was cancelled or
suspended for a portion of the policy period
or,
- The restarting of a policy limit after a
claim. This is normally associated with fire
coverage which commonly restarts the limit
after it has paid out.
Renewal
A new policy which replaces one that is expiring
or cancelled.
Rent Coverage
This insurance coverage protects building owners
against loss of income when rentals have been
interrupted or rental value has been impaired by
the occurrence of any of the insured perils.
Essentially this is Business Interruption
insurance for the landlord. It assures
continuous income while an insured building is
untenantable.
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.
No deduction is taken for depreciation in
arriving at the proper amount of insurance
needed to comply with the co-insurance clause.
Retroactive Date
For a claims-made policy, the retroactive date
is the earliest date for which a loss will be
considered. It is typically the effective date
of the first year the policy was provided by an
insurance carrier but date may be moved for
additional premium paid.
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 facing a risk.
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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.
Selling Price Clause
This applies to to the value of goods which have
been damaged or destroyed by an insured peril.
The purpose is to insure the profit that would
have been incurred through a sale. It defines
the insurable value of merchandise which has
been sold, but not delivered, at the amount at
which it was sold, less any charges not
incurred.
Sexual Harassment Defense Coverage
Protects against legal fees and costs arising
from charges of sexual harassment.
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.
Sue and Labor Clause
A stipulation in a policy that the insured will
take all necessary means to save property from
further loss and recover damages from others who
might have caused the loss. Under the terms of
this clause, the insurance carrier agrees to pay
all costs even if they exceed the limit of the
policy.
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.
Surety Bond
Insures a third party against non performance by
a contracted party or organization. Common in
the construction industry and to guarantee
ongoing payments.
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.
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Tail
In insurance, a tail refers to claims and losses
that have not yet been reported or discovered.
Tail Coverage
For claims-made policies, tail coverage is
purchased to protect against losses or claims
which have not yet been discovered or reported.
In this case, a retroactive date is purchased.
For occurrence policies, this is unnecessary as
claims are handled according to when they
happened instead of when they were reported or
discovered.
Terrorist Coverage
Protects against damage caused by acts of
terrorism
Time Element Coverage
Time element insurance provides insurance for a
covered incident resulting in loss of use of
property for a period of time. The loss is
considered to be time lost, not actual property
damage. Examples of time element coverage are
Business Interruption, Extra Expense, Tuition
Fees, Rents and Rental Value, Additional Living
Expenses, and Leasehold Interest coverage.
Tort
A tort is an unintentional violation of another
person's rights, usually due to negligence. It
is different than a crime, which generally is an
intentional violation of another's rights. A
tort is subject to civil action and subsequent
judgement for damages payable to the wronged
party, whereas a crime is subject to criminal
action and subsequent penalty.
Transit Coverage
Coverage of the insured's property while in
transit over land from one location to another.
Property insurance policies typically provide
coverage only at locations identified in the
policy.
Truckers Liability Coverage
Auto liability coverage for owners and operators
of businesses which transport the goods of
others by land for a fee. This coverage is
regulated by the Department of Transportation.
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Umbrella Liability Coverage
This type of liability insurance provides excess
liability protection. Your business needs this
coverage for the following three reasons:
- It provides excess coverage over the
"underlying" liability insurance you carry.
- It provides coverage for all other
liability exposures, excepting a few
specifically excluded exposures. This is
subject to a large deductible of $10,000.
- It provides automatic replacement
coverage for underlying policies that have
been reduced or exhausted by loss.
Underinsured Motorist Coverage
Fills in when a negligent party doesn't have
enough 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.
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Valuable Papers Coverage
An "all risk" insurance coverage that covers the
cost of research to reconstruct damaged records,
as well as the cost of new paper and
transcription.
The term "valuable papers" refers to written,
printed, or otherwise inscribed documents and
records, including books, maps, films, drawings,
abstracts, deeds, mortgages, and manuscripts.
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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.
Willful Injury
Coverage for self-inflicted or intentional
injuries to others are usually excluded from
most insurance policies.
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.
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