Insurance Terms

Actual Cash Value (ACV)-  In property insurance, ACV is replacement cost less depreciation.

"All Risk" (Open Perils) Policy-  Covers every conceivable peril (even an unusual one) except for those specifically excluded in the policy.

Attractive Nuisance-  A dangerous place, condition, vehicle or object that is particularly attractive to young children, such as a swimming pool with no fence around it.

Binder-An interim insuring agreement that provides coverage until the actual policy is issued.  However, a binder does not guarantee that a policy will, in fact, be issued.  A binder may be either oral or written.

Breach of Contract-  The violation of, or failure to perform, the terms of the contract;  the breaking of a legally binding agreement.

Casualty/Liability Insurance-  Insurance which is designed to cover legal liability imposed upon the insured for injury or damage to others or the property of others.

Certificate of Insurance-  A statement providing evidence that a policy is in force and outlining the coverages in effect.

Coinsurance Clause-  A clause under which the named insured shares in losses to the extent that he is underinsured at the time of the loss according to the formula:  Did Carry/Should have Carried X Loss= Claim Paid.

Comprehensive-  Physical damage coverage for the insured’s own vehicle for damage resulting from perils such as fire, theft, hail, or contact with a bird or animal.  This excludes collision.

Concealment-  Intentional failure to disclose a material fact on an application or on a proof of loss.  This may void the insureds/insurer contract.

Deductible-  A dollar amount of a claim which the insured must pay before the policy starts paying benefits.  The company pays for only amounts in excess of the deductible.

Depreciation-  The decrease in value of property overtime as the result of deterioration, obsolescence, or wear and tear.

Discovery Period-  A period of time in which a fidelity bond has been terminated in which to discover a loss. 

Doctrine of Utmost Good Faith-  An underlying principal of any contract which holds that contract will not work unless all parties involved pledge to make it work.

Endorsement-  A change or modification made to a policy to make it fit the needs of the policy owner.  It is not valid unless signed by an executive officer of the company and attached to and made part of the policy.

Exposure-  The state of being subject to a loss.  If you own a car or a home or a business you have both property and liability exposures.

Expressed Warranty-  Product guaranteed in writing.

Fair Credit Reporting Act-  A federal statute which governs the collection, reporting, and use of consumer credit information.  This act was designed to protect consumers against the misuse of such information.  Insurance companies must comply with this law to obtain a consumer credit report.

First Named Insured-  The first name listed on the policy's declaration page.  The individual who has the right to cancel or change the policy and the duty to pay the premium and should be the one notified should the insurance company wish to cancel the policy.

Functional Replacement Cost-  A method of calculating the cost to replace irreplaceable materials with functionally equivalent materials.

General Aggregate Limits-  Under a Commercial General Liability policy, the maximum to be paid out in any policy period for all losses, except Products-Completed Operations claims which have their own limits.

Incidental Occupancies Endorsement-  A homeowner's endorsement which provides coverage for an in-home business.

Indemnify-  To repay an insured for what has been damaged, lost, or destroyed.  To compensate, not to make the insured better off.

Insurance-  the transfer of risk of financial loss from an individual to a company, up to a stated amount.

Insurance Agent-  The legal representative of the insurance company.  

Limit of Indemnity/Liability-  The maximum amount an insurance company will pay under a policy.

Loss payment-  The method of paying a loss under a policy, such as ACV, replacement cost, etc. specified in the policy.

Mobile Equipment-  Land vehicles or machinery such as those in the construction industry or on a farm and not designed for use on public roads.

Money-  Any type of currency including:  coins, bank notes, traveler's checks, checks, and money orders. 

Mysterious Disappearance-  Property which disappears from a known location as a result of misplacing or losing, not theft.

No-Fault Insurance-  Proving fault against a party is not necessary in order to collect.  You simply collect from your insurance carrier. 

Nonrenewal-  Termination of the policy at the end of the policy period.

Occurrence Limit-  Under a liability policy, the limit that can be paid for any one claim.

Operations Liability-  The exposure that you as a business owner have while conducting operations away from your normal business premises.

Peril-  The cause of loss.

Premium-  The money a policy owner pays the insurance company for insurance coverage.

Products Liability-  The liability that arises from the manufacturing, distributing, or selling of a product. 

Proof of Loss-  A sworn statement concerning a loss under a property policy.  Insurance companies often settle claims without requiring a proof of loss.

Rate-  The amount of premium charged for a coverage.

Replacement Cost-  A form of settlement under which the insurance company, after a covered loss, will pay the insured enough to replace the destroyed property with new property of a like kind and quality without deducting depreciation.

Risk-  Chance/uncertainty of loss.

Securities-  Instruments representing wealth, such as stocks, bonds, tokens, or tickets- but NOT money.

Split Limits-  In automobile insurance, internal limits of liability for each of three types of liability losses: (1) bodily injury per person, (2) bodily injury per accident, and (3) property damage per accident, eg. 25/50/10.

Supplementary Payments-  Extra coverages provided by a liability policy consisting of benefits such as defense costs, regardless of whether or not you are at fault.

Tort-  A wrongful act (or failure to act) on the part of one person which gives another person the right to sue for damages.  Negligence, an unintentional tort, is covered by liability/casualty insurance.

Underwrite-  To assume risk in exchange for premium; to assume liability in the event of specified loss or damage; to insure.

Unoccupied-  People gone, but contents remaining in the building.

Vacancy-  Containing no people or property . 

Waiver-  The intentional relinquishment (giving up) of a right or privilege.

Work Cited

Property & Casualty Pathfinder 8^th Edition.  Indianapolis:  Pathfinder Publishers, 2001.