A quick reference to common insurance terminology. Use the letters below to jump to a section.
Coverage for accidental injury, accidental death, and related health expenses. Benefits pay for preventative services, medical expenses, and catastrophic care, with limits.
A supplementary life insurance benefit paying an amount in addition to the policy’s basic death benefit if the insured dies as the result of an accident, or loses any two limbs or the sight in both eyes as a result of an accident.
A supplementary life insurance benefit providing a death benefit in addition to the policy’s basic death benefit if the insured’s death occurs as the result of an accident.
Covers loss of sums owed to the insured by its customers that are uncollectable due to damage by an insured peril to accounts receivable records.
A lawsuit.
A method for placing value on property as of the time of its loss or damage: replacement cost less depreciation.
A person or corporation, other than the Named Insured on the policy, who is protected against loss by the terms of the policy (e.g. a funding source or landlord).
An insurance company licensed and authorized to do business in a particular state, and part of the California Insurance Guarantee Association (CIGA). If the company becomes insolvent, CIGA pays covered benefits and claims up to a certain amount.
A claim arising out of slander, libel, copyright infringement, or misappropriation of advertising ideas. Coverage is provided as part of Coverage B of the Commercial General Liability policy.
The total amount the insurance company will pay for all claims covered by the policy.
The insured and insurer agree on the value at the time the policy is written; the coinsurance clause is suspended.
A rating system by A.M. Best Company giving the financial condition of insurance companies.
Temporary authorization of coverage issued prior to the actual insurance policy.
Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
Coverage for more than one type of property at one location, or one type of property at more than one location — for example, a chain store.
Often called Equipment Breakdown or System Breakdown Insurance. Covers damage caused by the malfunction or breakdown of boilers and a wide range of other equipment, including air conditioning, heating, electrical, telephone, and computer systems.
A security obligating the issuer to pay interest at specified intervals and repay the principal at maturity. In insurance, a form of suretyship guaranteeing payment or reimbursement for losses from dishonesty, failure to perform, and other acts.
An intermediary between a customer and an insurance company. Brokers search the market for coverage appropriate to their clients, work on commission, and usually sell commercial rather than personal insurance.
Insurance for loss of property due to burglary, robbery, or larceny; provided in standard homeowners policies and business multiple peril policies.
Covers buildings against direct physical damage, subject to standard policy exclusions. Valuation can be based on Replacement Cost or Actual Cash Value.
Covers enforcement of a building, zoning, or land use law on the undamaged portion of a building caused by ordinances or laws requiring demolition or regulating construction, repair, zoning, or land use. Included in the building limit by endorsement.
Covers loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings.
Reimburses a business owner for lost profits and continuing fixed expenses while the business must stay closed for restoration after physical damage from a covered peril, such as fire. May also cover losses when civil authorities limit access to an area after a disaster.
Combines property, liability, and business interruption coverages for small- to medium-sized businesses, generally cheaper than purchasing each separately.
Covers personal property and contents against direct physical damage, subject to standard policy exclusions. Valuation can be based on Replacement Cost or Actual Cash Value.
An exclusion common to liability insurance contracts eliminating coverage for damage to property of others that is in the insured’s care, custody, or control.
A document providing evidence that insurance has been purchased.
A form of insurance that pays claims presented to the insurer during the policy term, or within a specific term after expiration, limiting the insurer’s exposure to unknown future liabilities. See Occurrence Policy.
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the property’s value to receive full payment on a loss. In health insurance, a percentage of claims above the deductible paid by the policyholder.
A property insurance provision imposing a penalty on an insured’s loss recovery if the limit of insurance purchased isn’t at least equal to a specified percentage of the property’s value.
The Consolidated Omnibus Budget Reconciliation Act — a federal law requiring group health plans sponsored by employers with 20+ employees to offer continuation of coverage to employees who leave and their dependents, for up to 18 months (longer for surviving dependents), with the employee paying the full premium.
Covers “slip and fall” type claims, the most common occurrence under this policy, along with Products and Completed Operations and Personal Injury coverage. Does not cover damage to property under the insured’s Care, Custody or Control.
A General Liability coverage for the insured’s work that has been completed away from the business premises.
Loss due to the use of a computer to fraudulently cause the transfer of property from the insured to a person or premises outside the insured.
All-risk property insurance for electronic data processing equipment (computers), computer programs, and data, including mechanical breakdown, electrical injury, and changes in temperature and humidity.
The cost of removing debris from covered property damaged by an insured peril.
The amount of loss paid or absorbed by the insured before the insurance company’s liability is determined.
The reduction in value of property over time, usually due to age, wear and tear, or economic obsolescence.
Covers intentional decisions made by an organization’s Board of Directors — for example, personnel policies the board adopts and management carries out that may result in damage other than bodily injury (e.g. an employee terminated and alleging age discrimination). Most other policy types won’t cover intentional actions.
An exclusion in most property insurance policies eliminating coverage for earth movement or earthquake, except resulting fire.
Covers direct physical damage caused by an earthquake, subject to standard policy exclusions.
Covers direct physical damage caused by fire sprinkler leakage due to an earthquake.
Protects the insured against claims by employees or former employees from negligent acts or omissions in administering the insured’s employee benefits program.
Loss due to embezzlement of money, securities, or other property by an employee acting alone or with others (fidelity bond).
Covers wrongful acts arising from employment practices such as wrongful termination, discrimination, and sexual harassment.
A form of professional liability insurance protecting the insured against claims alleging bodily injury or property damage caused by professional or technical incompetence. There is no standard policy form.
Covers necessary additional expenses incurred to continue normal business operations following a covered loss — for example, the extra cost to rent temporary facilities and equipment.
Covers claims arising from a breach of responsibilities or duties imposed on a benefit plan administrator, or a negligent act, error, or omission of the administrator.
Covers a rented or leased building against direct physical damage due to the insured’s negligence resulting in fire damage only. It’s important the limit equals what it would cost to rebuild the structure in a full fire loss.
When a policy names more than one insured party, the First Named Insured is responsible for paying premiums, initiates cancellations, and can amend the policy.
A contractual assumption by one party of another’s liability exposure. Lease agreements, for example, commonly require the tenant to hold the landlord harmless for bodily injury or property damage on the premises.
One who contracts to do a piece of work by their own methods and judgment, without the employer’s control except as to the results.
Loss due to robbery, theft, or disappearance of money or securities within a covered premises.
Covers loss of income, less non-continuing expenses, due to necessary suspension of business operations during the period of restoration after a covered peril. Consult your agent to find the right form of coverage, such as Actual Loss Sustained for 12 months (ALS).
Covers loss of anticipated gross rental income owed to the insured, along with the fair rental value of any portion of the property the insured occupies.
An insurance company doing business in a jurisdiction where it isn’t admitted to transact business. Policyholders aren’t protected by the state’s Guaranty Fund if the company becomes insolvent.
Insures the organization if it’s held liable for the actions of an employee or volunteer using their own vehicle on the organization’s behalf. Does not protect the employee or volunteer themselves, who should carry their own auto insurance.
Insurance that pays claims arising from incidents that occur during the policy term, even if filed years later. See Claims-Made Policy.
An endorsement paying the extra expense of rebuilding to comply with ordinances or building codes that didn’t exist when the building was originally built.
Covers the personal property of others in your care, custody, or control — for example, dry cleaners or auto repair shops.
A condition for which an individual received medical care shortly before their coverage’s effective date, or (for individual policies) an injury or sickness that first appeared within a specified period before the policy was issued and wasn’t disclosed on the application.
A form of errors and omissions insurance covering alleged professional misconduct or lack of skill. There is no standard policy form — review carefully to ensure your operations and staff/volunteers are covered.
Major agencies (A.M. Best, Fitch, Moody’s, Standard & Poor’s, and others) that determine insurers’ financial strength and ability to meet claims obligations.
Organizations such as the Insurance Services Office (ISO) that provide pooled industry loss data to help insurers, especially smaller ones, develop rates.
Insurance that pays the amount needed to replace damaged property without deducting for depreciation, limited by the maximum amount shown on the policy’s declarations page.
Management of the varied risks a business or association might face — analyzing exposures and choosing options such as safety measures, insurance, or self-insurance to manage or minimize loss.
The method used to determine the value of an item of real or personal property at the time of loss.
Coverage conforming to the workers’ compensation laws of the states in which it’s written. Mandated for most employers, it covers the cost of injury and lost time from an employee-related injury.
Disclaimer: This is intended for informational purposes only and should not be construed as legal advice or part of your insurance policy’s terms and conditions.
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