Glossary of Terms
ABANDONMENT - To relinquish ownership of property that has been lost or damaged and “abandon” it to the Insurance Company for the purpose of claiming a total loss. The Fire Policy provides there can be no abandonment to the company without its consent, also applies to Automobile Insurance.
AB INITIO - From the beginning, policy obtained by fraud can be declared void by the insurer as though it never was.
ACCIDENT - 1) An unusual fortuitous, unexpected, or unforeseen event or occurrence. 2) A mishap that is not expected or designed. An unforeseen occurrence at a given time and place occasioning physical injury to persons or property. Occurrence is more of an ordinary event except it excludes the idea of chance or action or violence or design. An occurrence can happen over a period of time.
ACCIDENT PREVENTION - Methods insurers and their insureds us to prevent accidents, e.g., removing a hazardous condition.
ACTUAL CASH VALUE - The fair market value of property taking into account factors that might augment or reduce the value of the property in question.
ADDITIONAL INSURED - A person other than the named insured who is protected by the terms of the policy. Most automobile policies, for example, insure a specific individual as an insured, but also insure anyone driving with the insured’s consent. The additional insured may be “named” or “unnamed”.
ADDITIONAL LIVING EXPENSE INSURANCE - Coverage applicable when an insured’s dwelling is damaged by an insured peril to such an extent that one cannot live in it until repaired. This insurance pays the extra amount it costs to live elsewhere until repairs are made, such as the cost of living in a hotel.
ADDITIONAL PREMIUM - An extra charge, during the policy period, for an alternation which increases the hazard or the insurer’s liability.
ADJUSTER - 1) One who represents an insurer on investigations and dealings with respect to settlement of claims. This may be a salaried employee of an insurer or one who operates as an Independent Adjuster. 2) A Public Adjuster is an adjuster who is employed by a policyholder to represent him in his claim negotiations with an insurance company. As compensation the Public Adjuster usually takes a percentage of the amount collected. He does not act on behalf of an insurance company.
AFFIDAVIT - 1) A sworn statement. 2) A written statement in the name of a person known as the “dependent,” who has voluntarily signed and sworn or affirmed to such a statement.
AGENT OR BROKER - 1) A person who is employed to act on behalf of another. 2) An insurance agent or broker is one who contracts with one or more insurance companies to sell their insurance policies to the public and is paid a commission on or receives compensation for such business.
AGREEMENT - Where two or more persons come to a mutual understanding with respect to their rights and duties.
ALL RISK POLICY - A name given to an insurance policy which covers against the loss caused by all perils except those which are specifically excluded by the terms of the policy. Frequently, a policy of insurance is written to insure damage to property caused by specific “named perils” which are listed on the policy. However, policies may be issued in certain cases to insure against “all risks of loss or damage” and are then called “all risks” policies. The term excludes insurance against certain hazards.
AMOUNT OF INSURANCE - The limit of payment for which an insurer is liable under a policy.
APPLICANT - The person or firm requesting insurance.
APPLICATION - A request for insurance. This may be done verbally, in writing or by using a printed form. e.g., auto application, fire policy application, cover note or binder.
APPRAISE- To set and state in writing the true value of property.
APPRAISER- Person who because of special knowledge is vested with authority in determining the real value of property or damage.
ARSON - At common law, the deliberate and intentional burning of property by its owner or by another person.
ASSETS - Property of all kinds, real or financial, that belongs to a person or corporation or to the estate of decedent.
ASSUME - 1) To undertake or promise. In insurance, a company or an underwriter “assumes” a risk when he agrees to insure it. That is when insurance attaches. 2) Common usage pertains to acceptance of a risk by a reinsurer from an insurer.
AUTOMOBILE FLEET - A group of automobiles under the same ownership and management which may, because of the number, justify a discount in the insurance premium. Usually five or more vehicles.
AUTOMOBILE INSURANCE - Insurance coverage that provides indemnity and/or compensation for injury or physical damage which ensues from the ownership, use or operation of an automobile.
BAD FAITH - 1) Design to deceive or mislead another. 2) Conscious wrongdoing. 3) Constructive fraud.
BETTERMENTS - Physical improvements beyond mere maintenance or repairs that augment the value of a property.
BINDER - A binder is deemed to be the policy and must be cancelled in the same manner. Note: a binder may also be issued by an insurance broker and must be cancelled in the same effect. It is indeed a contract.
BODILY INJURY - A term used in auto and liability policies meaning physical injury, including sickness, disease, mental injury, shock or death.
BOILER AND MACHINERY INSURANCE - Coverage that indemnifies in the event of loss with respect to and arising from the ownership, use and operation of boilers, pressure vessels and machinery.
BOOK VALUE - The value of an asset as shown in the company’s books. Generally this has no relation to the market value or to the amount to be paid in the event of an insured loss.
BROKER - An independent person or firm who acts on behalf of insured in placing business with insurance companies. See also definition of insurance agent and broker.
BUILDERS RISK INSURANCE - Insurance coverage on property under construction including loss to buildings or ships, including machinery and equipment, in course of construction, and materials incidental to construction.
BURGLARY - Unlawful removal of property from premises involving visible forcible entry.
BUSINESS INTERRUPTION INSURANCE - Various types of insurance against business expenses and loss of income resulting from a fire or other insured peril.
BY-LAW - A law or ordinance dealing with matters of local or internal regulation made by a local authority or by a corporation or association.
BY-LAW ENDORSEMENT - An endorsement explaining how a particular insurance company deals with a claim which is affected by a local by-law.
CAMERA FLOATER - A property form of insurance designed to insure cameras and its equipment.
CANCELLATION CLAUSE - Provision in insurance policies or bonds stipulating how the policy or bond can be cancelled.
CARE, CUSTODY AND CONTROL - A term used primarily in liability coverages which refers to property belonging to another but which is legally in the insured’s possession or under his control.
CERTIFICATE OF INSURANCE - Written document stating that insurance is in effect. Includes general statement of policy’s coverage.
CERTIFIED COPY - Reproduction of a document, that authority have custody of original signs and attests as a true, genuine and authentic copy.
CLAIM - Strictly speaking, a claim is the exercising of the right of an insured to be indemnified by his insurance company for damage suffered. It is frequently used, however, to indicate the amount of the claim. In practice, it is any notification of a possible loss under an insurance policy whether any payment is likely to follow or not. For every claim that is reported, the insurance company must set aside reserves equal to the figure which it is anticipated the claim will cost.
CLAIM RESERVE - The amount of money set aside by an insurance company for reported but unpaid claims and incurred but not reported (IBNR) claims including claim expenses.
CLAIMANT - One who makes a claim.
CLAIMS EXAMINER - An employee of an insurer who handles and is responsible for incoming claims.
COMPENSATORY DAMAGES (GENERAL DAMAGES) - Paid for direct loss of use, injuries or care and loss of services for bodily injury or property damage.
COMPREHENSIVE GENERAL LIABILITY POLICY (CGL) - A policy particularly suited to a manufacturer, contractor or large wholesaler or retailer providing broad coverage for claims made against him for bodily injury or damage to property of others for which he may become liable and which arise out of his entire business operation.
COMPREHENSIVE PERSONAL LIABILITY (CPL) - A form of liability insurance for individuals which insurers the policyholder in the event he has become liable to pay money for damage or injury he has caused to others. This form does not include automobile liability, but does cover almost every activity of the policyholder except those which arise from the operations of a business. Hence “Personal” Liability.
CONDITIONS - The general terms or requirements upon which the insurance is based. For the mutual understanding of the parties the conditions will commonly state such matters as how the policy can be cancelled or renewed, provision with respect to change of the insured’s interest, provisions as to what an insured should do in the event of a loss, and conditions as to what he should do subsequent to a loss.
CONDOMINIUM - Is the individual ownership for a single unit in a multiple unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In a condominium building, each condominium would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.
CONTRACT - An agreement made between two or more persons, which is intended to be enforceable at law, and is constituted by the acceptance by one party of an offer made to him by the other party, to do or to abstain from doing some act. The offer and acceptance may either be expressed or inferred by indication in the conduct of the parties.
COVER - To protect with insurance, or the insurance protection provided.
COVER NOTE - The document which tells the insured that the insurance described therein is in effect. Since there are often delays in issuing formal policies, a cover note gives he insured a description of what insurance is in effect.
COVERAGE - The nature of protection afforded by a particular policy. Can be used at times interchangeably with “insurance” or “protection” as “fire coverage” or “fire protection” or “ fire insurance”.
DEATH BENEFIT - An amount set out in the policy representing the amount that will be paid in the event of death. Also referred to as “principal sum.”
DEBRIS REMOVAL - A provision in an insurance policy most commonly found in fire insurance providing indemnification for the cost of removal of the debris after a fire.
DECLARATION - Statement, signed by the insured, warranting that information given by him is true.
DEDUCTIBLE - An agreed specified sum to be deducted from the amount of the loss and assumed by the insured.
DEPRECIATION - Reduction in value of property through use, ageing, deterioration and obsolescence.
DIRECT DAMGE - Damage caused directly to something.
DIRECT LOSS (OR DAMAGE) - Damage to property by direct action of a peril insured against as distinguished from contingent or indirect damage. An example of Direct Loss: fire, wind, hail.
DUE DILIGENCE & DISPATCH - A requirement of the insured to repair the direct loss as quickly as practicable to reduce a consequential loss.
EFFECTIVE DATE - The date of inception of an insurance policy, or the date additional coverages become effective.
ENDORSEMENT - An amendment added to a written document, particularly an agreement between parites, altering its provisions.
ETHICS - The discipline dealing with what is good and bad and with moral duty and obligation, the principles of conduct governing on individual or a group.
EXCLUSION - Risks, perils or properties defined in the policy as not covered.
EXPIRATION - The date on which a policy/binder automatically expires.
EXPIRY - End of the policy period.
EXPOSURE - The hazard threatening a risk because of external or internal physical conditions.
FAIR MARKET VALUE - Price at which a buyer and seller, under no compulsion to buy or sell, will trade.
FARMER’S COMPREHENSIVE POLICY - A comprehensive liability policy covering the operation of a farm.
FIRE - Combustion manifested in light, flame and heat for useful purposes (friendly fire) or destructive purposes (hostile fire). Fire used to heat premises, cook meals are known as friendly fires. Fires when uncontrolled, can be an enemy of man and destroy his houses, crops, lumber stands, etc. Such fires are known as hostile fires and are the subject of insurance.
Most commonly, the fire must be a combustion with actual and visible flames to be a fire as contemplated by the fire policy.
There are many borderline cases. For example, scorch marks from a friendly fire will produce different interpretations in different areas. Also, smoke from a fire place is considered a friendly fire and the damage caused by the smoke in some insurance policies. But we must remember the original concept of fire insurance was to cover hostile fires.
FIRE RESISTANT - A fire resistant building or article is generally designed to resist certain higher temperatures for a certain period of time.
FIREPROOF - Fireproof, in insurance , means something with a very high degree of resistance to the spread of fire.
FLAT CANCELLATION - The cancellation of a policy as of the effective date with all paid premium refunded.
FLEET POLICY - In automobile insurance, this is a policy insuring a number of cars for one owner, e.g., a common ownership must be attached and also be a minimum of five automobiles to apply.
FLOATER POLICY - A policy covering the same risk at a number of perhaps unspecified locations possibly over a wide area (even world-wide), e.g., usually includes goods being frequently moved from one location to another, e.g., Fur Floater, Jewellery Floater, Contractors’ Equipment Floater etc.
GARAGE LIABILITY INSURANCE - Protection for an automobile dealer, repairer, service station etc. This coverage is for their legal liability for claims for bodily injury and property damage due to business operation.
GOOD FAITH - Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.
HAIL INSURANCE - Insurance of property against damage which occurs by hailstorm. Usually refers to growing crops.
HOMEOWNERS POLICY - A multi-peril insurance policy for dwelling risks, combing coverages, for fire, and extended coverages including theft, and liability.
IMPROVEMENTS AND BETTERMENTS - Additions or changes to a rented premises by a tenant at his own expense. Also called Tenant’s Improvements. Or in a condominium policy is addition and changes that the owner the condominium has done to his premises to better his property.
INCEPTION - The date and time on which coverage under an insurance policy takes effect.
INDEPENDENT ADJUSTER - One who adjusts losses on behalf of insurance companies, but is not employed by any one insurance company.
INSURABLE INTEREST - An interest which the insured must have on the subject matter of the insurance he buys so that if the event insured against occurs, the insured will suffer a pecuniary loss.
INSURANCE - A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.
INSURANCE POLICY - A written contract of insurance.
INSURED - The entity (individual or otherwise) whose risk of financial loss from an insured peril is protected by the insurance policy.
INSURER - The company providing the insurance coverage.
LEGAL LIABILITY - Liability imposed by law on individuals or corporations to pay for harm done to others. Such law may be the common law, statute law or customs which over a period of time have taken on the same status as law. Legal liability may also be assumed under the terms of a contract.
LESSEE - One that holds real or personal property under a lease, e.g., a tenant of rented premises.
LESSOR - One that conveys property by lease, e.g., a landlord of rented premises.
LIABILITY INSURANCE - Insurance which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property.
LIABILITY LIMITS - The maximum amount of insurance provided under a policy of liability insurance.
LIVESTOCK INSURANCE - Insurance against loss (death) to animals owned by the insured. The cover can be on an all risk or a specified perils basis and includes loss by theft. The insurance is usually written by specialist livestock insurers and also most farm insurance companies.
LOSS OF USE INSURANCE - Cover against expenses incurred as a result of damage to the property insured resulting in the need to replace the property on a temporary basis. In automobile insurance this might refer to the cost of a rental car while the insured vehicle is under repair as a result of an accident. In a homeowners policy it might refer to additional living expense when the insured premises are rendered uninhabitable by an insured peril.
MORTGAGE CLAUSE - The insurance industry has designed a standard clause that mortgage companies have agreed to that spells out the terms and conditions of payment in the event of loss of insured property. Mortgage company gets paid even though the insured may have breached conditions of a contract. E.g. arson.
MORTGAGEE - One who loans money.
MORTGAGOR - One who owes money.
MYSTERIOUS DISAPPEARANCE - The disappearance of insured property in an unexplained manner. For example, if a ring is left in a public place and the owner returns later to find the ring gone, it is reasonable to assume that the ring has been stolen. However, there is no direct evidence that this is in fact what happened. This would be an example of mysterious disappearance.
NAMED INSURED - The person or party designated in the policy as the insured, as opposed to someone who may be covered by the policy, but is not specifically named.
NAMED PERIL POLICY - A policy in which the perils insured against are listed, as opposed to one which insures against, “all risks.”
NEGLIGENCE - Failure to use the degree of care expected from a reasonable and prudent person.
NON-OWNED AUTOMOBILE INSURANCE - A policy which protects the insured against third party claims arising out of some other person using their own vehicle in the business of the insured.
NOTICE OF LOSS - The conditions of the insurance policy require that any person sustaining a loss insured by the policy shall immediately give notice to the company of such loss. Failure to give notice as required has been held to be a bar against recovery, the notice is required to be in writing, and verbal notice to the agent or broker will not be sufficient to comply with the condition.
NULL AND VOID - Of no legal or binding force; invalid.
OCCUPANCY - Occupancy is the act of holding possession of property or premises. The term implies the use of the building for the purposes described in the policy, and no other. An occupied building has furnishings and/or people in it.
OCCURRENCE - A happening or event . Liability policies are usually written on either an accident or occurrence basis. For coverage on an accident basis, the loss or damage must be due to accident, whereas on an occurrence basis all that is required is the happening or the continual or repeated exposure to an unfavourable situation, neither intended nor expected to cause injury or damage. In reinsurance and insurance it is also the grouping of related losses into a single loss situation.
PARTIAL LOSS - A loss covered by an insurance policy where the property or the premises are not completely destroyed or rendered completely worthless.
PERIL - The event that caused a loss covered by the policy, e.g., fire, windstorm, hailstorm.
PERSONAL EFFECTS FLOATER - A policy covering personal effects usually carried by tourists. Can be all risk or specified peril form. Covers worldwide but excludes coverage at the insureds residence.
PROOF OF LOSS - A formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of its liability.
PRO RATA CANCELLATION - Cancellation of an insurance policy or bond with the return premium credit being the full proportion of premium for the unexpired term of the policy. Done on a day to day basis.
RIDER - Another name for an endorsement.
RISK - The chance of loss. Specifically the possible loss or destruction of property or the possible incurring of a liability. Sometimes refers to the subject of an insurance contract.
SHORT RATE CANCELLATION - The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium which is less than the proportionate part that remains unearned.
SHORT RATE CANCELLATION - The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium which is less than the proportionate part that remains unearned.
SMOKE DAMAGE - Essentially, the devaluation by smoke, not fire, of merchandise and property. Such damage is covered by the fire damage.
SUBROGATION - Once a company has paid a loss for which someone other than the policyholder is responsible, it may have the right to recover this loss from the guilty party. This right is called subrogation.
TENANTS POLICY - A package policy specially designed to meet the normal insurance requirements of a private tenant covering personal belongings and liabilities.
TERM - The period of time from the inception to the termination of an insurance policy or bond.
UMBRELLA POLICY - A special form of liability policy designed to protect the insured for certain unknown contingencies over and above the normal coverages and to provide excess insurance.
UNOCCUPIED - Referred to in property insurance as the risk that no one is living or residing but does have furniture contained therein. Could be very little furniture. No time limit on unoccupancy. Someone will return to the property to live in it.
VACANT - Property that usually has the contents removed and where no person is returning to occupy the property.
VACANT BUILDING - A building with no occupants or furnishings.
VALUED POLICY - A policy which provides that a special amount shall be paid in the event of a total loss of the property.
VOID - 1) Invalid, not legally binding. 2) An insurance contract that is prohibited by law and thus cannot be held to be a valid contract.