Insurance Glossary

Actual Cash Value: 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.

Advertising Injury: This coverage pays for damages done in the course of oral or written advertisement that disparages, libels or slanders a person’s or organization’s goods, products or services. Coverage for these offenses is provided under Advertising Injury coverage only if they occur during the course of advertising the named insured’s own goods, products or services.

Agreed Amount Endorsement: This endorsement is an agreement made by the insurance company that 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.

Annual Rental Income: Total annual income from rental units at the insured’s location.  For co-ops and condos, this applies to total annual maintenance fees only.

Auto Collision Coverage: Optional auto insurance, which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your automobile caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.

Boiler & Machinery Coverage: Provides important 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.

Builder’s 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 during the course of construction. Coverage customarily includes fire, extended coverage, vandalism and malicious mischief. Builder’s Risk Coverage can be extended to include coverage for items in transit to the construction site (up to a certain percentage of value) and items stored at the site.

Buildings and Business Personal Property: Coverage for the building that includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured’s premises is also insured. Business personal property owned by the insured and used in the insured’s business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designed to protect the insured against loss or damage to the personal property of others while in the insured’s care, custody or control.

Building Ordinance / Law or Ordinance Coverage: Provides coverage for the undamaged portion of the building that is required by a building ordinance to be demolished due to a partial loss. Demolition Cost covers the cost to demolish and clear the site of undamaged parts of the property. Increased Cost of Construction covers the increased cost to repair or rebuild the property caused by enforcement of the building ordinance.

Building Value: The replacement cost value of a building only (excluding land).  This is not the Market Value.

Cash Value (Cash Surrender Value): The cash amount payable to a life insurance policy owner in the event of termination or cancellation of the policy before its maturity or the insured event.

Causes of Loss:  A peril is a Cause of Loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies, often referred to as Broad Form policies, add coverage for water damage, weight of snow, ice or sleet, breakage of glass and falling objects. The broadest coverage is the Special Form, which is best known as the “All Risk” form. All Risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form.

Coinsurance: Most building and business personal property polices have a coinsurance clause which requires the insured to carry insurance equal to at least a specified percentage of the actual cash value of the property. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured.

Comprehensive General Liability: Covers any lawsuits for bodily injury or property damage against the named insured with respect to the covered property.

Contractor’s Equipment Floater: The property covered on the Contractor’s Equipment Floater might range from simple hand tools to very large cranes. Virtually any type of mobile equipment or tool can be insured. The equipment covered can be used in a wide variety of operations ranging from home improvements to strip mining. Equipment might be used to build roads, buildings, pipelines, or many other types of structures. The coverage provided is for direct physical loss to the equipment. Rental reimbursement coverage can be added by endorsement to cover the cost of renting substitute equipment if covered property is out of service by a covered cause of loss.

Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and your insurance company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of the insurance premium.

Depreciation: Reduction in the value of property due to age and use.

Each Occurrence: Each Occurrence is considered to be an accident, which could include continuous or repeated exposure to the same harmful conditions. An occurrence can also be a sudden event, or the result of a long-term series of events.

Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract’s original terms.

Face Amount: The amount stated in the life insurance policy as the death benefit.

Fire Damage Limit: The Fire Damage Limit provides coverage for fire damage caused by negligence on the part of the insured to premises rented to the named insured. If a fire occurs because of negligence of the insured and causes damage to property not rented to the insured, coverage would be provided under the occurrence limit.

General Aggregate Limit: The General Aggregate Limit is the most money the insurer will pay under certain coverage for all claims occurring during the policy term.

Hired & Non-Owned Auto Coverage: Covers bodily injury or property damage arising out of the use of non-owned or hired auto in the business of the named insured.

Insured: The person whose insurable interest is protected under an insurance policy.

Lapse: Termination of a policy due to nonpayment of premiums.

Liability Coverage: Insurance that provides compensation for harm or wrong to a third party for which an insured is legally obligated to pay.

Limit of Insurance: The most the insurer will pay for loss or damage in any one occurrence is the limit of insurance stated in the policy declarations.

Loss: A claim either paid or payable due to the insurer’s policy obligations.

Medical Expense Limit: Medical payment coverage that pays medical expenses resulting from bodily injury caused by an accident on premises owned or rented by the insured, or locations next to such property, or when caused by the insured’s operations. These payments are made without regard to the liability of the insured.

Medical Payments Coverage: Medical and/or funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured’s negligence.

Peril: The cause of loss or damage.

Personal Injury: Personal Injury means injury other than bodily injury. Coverage is provided for injury resulting from offenses such as false arrest, malicious prosecution, detention or imprisonment, the wrongful entry into, wrongful eviction from, and other acts of invasion, or rights of private occupancy of a room. Coverage for libel and slander is also provided in the policy.

Personal Property Insurance: Protects against the loss of, or damage to, property other than real property (real estate) caused by specific perils.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Premises / Operations: Coverage is provided for damages arising out of ownership or occupancy of the insured premises, when not maintained in a reasonable manner. This also covers damages arising out of operations performed by the insured’s business.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Products / Completed Operations: Products Coverage is provided for damages arising out of products manufactured, sold, handled or distributed by the insured. Completed Operations covers damages occurring after operations have been completed or abandoned, or after an item is installed or built and released for its intended purpose.

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Replacement Cost and Actual Cash Value: Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid: the replacement cost method and the actual cash value method. Insurers consider replacement cost of a property item to be the cost to replace it with new property of like kind. Actual cash value is replacement cost, minus the accumulated depreciation for age and condition.

Required Underlying Limits: Required Underlying Limits is a requirement of the insurer. It requires the insured to have certain types and amounts of primary insurance before an umbrella policy can be written.

Self-Insured Retention: The Self-Insured Retention is the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self-insured retention would only apply when a loss is excluded from coverage under the primary policy, but is not excluded under the umbrella policy.

Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. The type of policy does not build up any cash or non-forfeiture values.

Theft Limit (or Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5000 limit for computers.

Uninsured Motorist Coverage: Coverage that pays for bodily injury that an uninsured motorist is legally liable but unable to pay.