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Accident – an unintended, and unexpected event or occurrence which could not be foreseen.

Accident prevention – avoidance of the occurrence of an accident. Reduction of its consequences if it does occur, such as control of personal or machine performance.

Actual cash value – replacement cost new at the time of loss, less depreciation.

Additional living expense insurance – insurance for the extra amount it costs an insured to live until repairs are made to the insured’s dwelling.

Adverse selection – insuring one or more risks with a higher chance of loss than that contemplated by the insurance rate. The selection of such risks is adverse because the rate is inadequate.

Agent – one who has the authority to act for another. In insurance language, an agent is the person who sells insurance to the policyholder.

Agent’s authority – the authority legally granted to an agent in the contract between the agent and the insurer.

Agent’s license – the license issued by the state giving authority to a qualified agent to conduct specific types of business. Usually a time period is indicated on the license. There are laws which define standards of insurance knowledge that an individual must meet in order to be licensed.

Aleatory contract – because this is a contract of unequal value, the insurance policy is a common example as the consideration provided by the insured is the premium dollar, and the consideration of the insurer is a promise to pay should a covered loss occur. The amount of coverage provided by the insurer may exceed the lifetime accumulation of premiums paid by the insured.

All-risk policy – covers loss caused by any cause of loss which is not excluded. The “named peril” policies, by contrast, protect against perils which are specifically listed in the policies.

Amount of insurance – the most an insurer will pay for any single loss. The maximum amount an insured can collect.

Anniversary date – the anniversary date of policy inception as listed in the policy declarations, and each subsequent renewal.

Application – a written statement by a prospective policyholder giving the information the company relies upon to underwrite, rate, and issue the insurance policy.

Appointment – an insurance company authorizes an agent to act on that company’s behalf.

Appraisal – property valuation.

Appraiser – one who determines the value of property. A party who determines the amount of a disputed loss.

Appreciation – the amount by which property has increased in value.

Approved – something which meets the standards set up by insurers.

Approved roof – usually a roof made of fire-resistive material as opposed to wood shingles.

Appurtenant structures – other structures usually of lesser value, located on the same premises as the main dwelling insured under a property insurance policy. Common examples are small metal service buildings or storage sheds, and detached garages.

Arson – intentional destruction of property by fire.

Arson fraud – arson that is either committed by or at the direction of the insured for the purpose of collecting insurance proceeds by the insured.

Attractive nuisance – a condition which attracts those (usually children) who may be injured. Examples are unfenced/unattended swimming pools, trampolines, or swing sets.

Automobile liability insurance – legal liability protection for bodily injury or property damage of others due to the negligence arising out of ownership or use of an automobile.

Automobile physical damage insurance – loss or damage to the insured’s automobile.

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Basic cause of loss – specific perils named in the policy covering losses to property. Most often covered losses named are: fire, lightning, explosion, windstorm, hail, aircraft or vehicle damage, smoke, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

Basic limits – liability insurance may be written for minimum limits (determined by law or company custom) for which basic premiums are paid. Usually, additional limits may be purchased for an additional premium.

Binder – an agreement stating that coverage exists prior to the issuance of the policy. May be oral or written.

Binding authority – one party (usually the agent) has been given the right and authority to represent another party (usually the insurance company) in effecting an insurance contract.

Bodily Injury (may be referred to as BI) – injury, sickness, or disease

Bodily injury liability insurance – protection covering the insured’s legal liability for bodily injury to others caused by the insured’s negligence.

Breach of warranty – warranties are statements given as guarantees by the insured. These warranties are taken as the literal truth on which the insurance contract depends. Breach of warranty exists when a warranty is broken by the insured.

Brick building – outer walls are at least the thickness of two bricks in width.

Brick veneer – outer walls are made of wood covered with a single brick. In a brick building, the supporting walls are brick. In a brick veneer building, the supporting walls are wood.

Broad cause of loss – see Basic cause of loss. In addition to the perils named in Basic cause of loss, the following additional perils are covered: breakage of glass, falling objects, weight of ice, sleet, or snow, water damage, and collapse as defined in the policy.

Broker of record – a licensed agent who represents the policyholder.

Builders risk – a building under construction requires a special form which covers the unique loss exposures of buildings under construction.

Burglar alarms – devices which give warning of entry of unauthorized persons on the premises. Insurance premium discounts are usually given for approved burglar alarms.

Burglary – visible signs of forcible and illegal entry to commit theft.

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Cancellation – termination of a policy before its expiration.

Cancellation notice – a notice of termination of a policy issued by one party of the policy to the other. Policy provisions and state statute must be followed with respect to how the notice must be given, legal number of days that must be allowed, and how the notice must be delivered.

Carrier – the insurance company.

Casualty insurance – insurance covering legal liability for personal injuries or damage to property of others. Casualty is a term used to define all classes outside the definition of property insurance. A property and casualty company would handle all forms of insurance other than life and health.

Catastrophe – substantial financial impact created by a severe loss usually involving many risks.

Cause of loss – the type of event that causes the loss, previously referred to as a peril. Examples are: fire, lightning, wind, collision, etc.

Certificate of insurance – a short documentation of an insurance policy. It does not change the policy.

Change in occupancy or use – some policies require the insured to let the insurance company know of any change in occupancy or use. Some states allow the company to cancel or void the policy if the change increases the hazard insured against.

Claim – an amount requested by a policyholder or a claimant to pay for an insured loss.

Claim department – insurance company staff handling losses or claims.

Claimant – person who presents a claim against an insured’s policy and has suffered a collectible loss.

Classification – a method of arranging persons or properties into groups according to similar criteria. This method is used in insurance to create statistical experience and determine rates and avoid unfair discrimination.

Collision damage waiver – for an additional fee charged by a rental agency, the rental agency waives its rights to collect any collision losses from the renter.

Collision insurance – coverage for loss resulting from collision with another object by a moving vehicle.

Comparative negligence – a method used to determine the degree of negligence each party contributed to the total damages for bodily injury or property damage. In most cases, damages against the other party cannot be collected at all if the claimant’s negligence was greater than the other party’s negligence. Some courts have awarded both parties the percentage of the total damages based on the respective degrees of fault.

Comprehensive automobile coverage – an all risk type of coverage providing physical damage protection for automobiles, except loss by collision or upset.

Compulsory insurance – some states require automobile liability coverage be carried.

Concealment – failure to advise the insurance company of a material fact which may cause the insurance policy to be voided.

Condominium – real estate ownership of an individual unit in a multiple-unit building or group of buildings. Usually a part of the total property is owned jointly by all the unit owners. Because of the uniqueness of ownership, special insurance is required.

Condominium association coverage – policies designed to protect the association for specific liability, maintenance equipment, and property held in common.

Condominium unit owners form – policies designed to cover the liability and property needs of the unit owner.

Constructive total loss – the cost of damage to repair or replace the property exceeds the insured value.

Contributory negligence – if the plaintiff has any degree of negligence, they cannot recover from the defendant.

Cooperative – an apartment building may be owned by a group of individuals, each owning a share in the building, rather than owning individual apartments.

Coverage – insurance protection provided by an insurance policy.

Credit report – an individual’s credit rating, habits, personal characteristics, and other facts which might influence the decision to insure the individual.

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Debris removal – after a property insurance covered cause of loss has occurred, this provision in the policy provides coverage for the cost of clean up and debris removal, such as after a windstorm.

Declaration page – a part of the insurance policy which provides the name and address of the insured, the locations covered, the property covered, the policy period, limits of insurance, endorsements, and premiums.

Deductible – this is usually a dollar amount subtracted from the total damages before determining the amount the insurance company will pay.

Defense provision – in liability insurance policies, the insurance company has the right and duty to defend a lawsuit against the insured, even when those suits are considered false, groundless, or fraudulent.

Deposit premium – usually an estimated payment due at the inception of the policy.

Depreciation – physical aging, wear and tear, or obsolescence of property causing a reduction in value.

Detached structures – structures located on the same premises, not attached to another structure.

Direct billing – the insurance company sends billing notices directly to the insured instead of premiums being collected by the agent.

Direct damage/loss – causes of loss which produce direct damage to property with no interruption in time.

Disclaimer – denial of liability such as the denial of a claim or coverage based on just grounds.

Domestic company – an insurance company incorporated in a particular state.

Drive to and from work – in personal auto insurance this is a rating category used to classify the distance the principal operator of the vehicle drives to work. Usually classified as under 3 miles one way; 3 to 15 miles one way; over 15 miles one way.

Drive other car coverage – in most personal automobile policies there is a provision which protects, in some circumstances, the policyholder and other insureds, when they drive vehicles not listed on the declarations page.

Driver training credit – most insurers provide a credit for successfully completing an approved driver education course.

Dwelling – a structure where people reside as distinguished from a warehouse, retail store, or any other building.

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Effective date – sometimes referred to as the inception date or the first day coverage is activated.

Endorsement – when a change is made to an existing policy, a document is produced which becomes part of the policy. This document (endorsement) modifies the basic policy.

Exclusion – statements in the policy which specifies that which is not covered by the policy.

Expiration – the end of the time period for which coverage is written.

Exposure – chance of loss, the sum total of values of everything the policy insures.

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Fine arts insurance – usually written on an “all risks” and a “valued” basis providing personal lines coverage for works of art.

Fire – combustion contained in its intended place for a useful purpose is known as a “friendly fire”, or if outside or not contained in its intended place is known as a “hostile fire”. Insurance only covers losses caused by a “hostile fire”.

Fire department service provision – sometimes the fire department makes a charge when the property is located outside the city boundaries and this provision extends the policy to pay for this charge in the event of a covered loss.

Fire insurance – covers losses caused by fire, lightning and removal of insured property from the premises to prevent further loss. This coverage is referred to as property insurance and will also cover resulting water and smoke damage.

Fire insurance company – companies which principally write property insurance and is chartered and licensed under the provisions of the laws in its home state.

Fire marshal – a public official working in fire prevention and investigation of fires, particularly where arson is suspected.

Fire prevention – methods used to prevent fires.

Fire protection – methods used to prevent, detect, and extinguish fires.

Fire resistive – buildings constructed of noncombustible materials to reduce the frequency and effect of fire.

Fire retardant – a chemical applied to items to prevent or reduce the chance of the item catching fire.

Fire wall – a wall to prevent the spread of a hostile fire.

Fireproof - buildings constructed of noncombustible materials to reduce the frequency and effect of fire.

Flat cancellation – cancellation of a policy as of the date of inception or effective date and a full refund of the premium to the policyholder.

Flat deductible – the amount which will be subtracted from each claim.

Flood – water which overflows from its natural boundaries. Specifically defined by the National Flood Act of 1968 as “a general and temporary condition of partial or complete inundation of normally dry land areas from the overflow of inland or tidal waters, or the unusual and rapid accumulation or runoff of surface waters from any source.”

Flood insurance – coverage for damage caused by the overflowing bodies of water.

Form – the specifics of the insurance issued is described in this document (form).

Fortuitous – in insurance terms, this is a happening by chance, accidental and unexpected.

Foundation exclusion clause – a fire policy usually states that the foundation is not insured and the value of the foundation may not be used to determine the proper amount of insurance under a coinsurance clause.

Foundation wall – masonry wall below the surface of the ground which supports the building.

Frame building – the outer walls of the building are constructed of wood.

Fraud – deceitfulness, dishonesty, deliberate deception.

Friendly fire – a fire under control, started voluntarily, and in its intended place.

Full coverage – usually means coverage up to the stated policy limit without subtraction of a deductible.

Functional replacement cost – an endorsement may be attached to modify the replacement cost valuation in the event of a total loss. Replacement cost would then be calculated on the functional (part used for a special purpose) replacement instead of total replacement. Functional replacement would be based on less size and result in less value than total replacement.

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Gap – an insurance term to describe an uninsured limit between what is required for underlying limits by an excess insurer; i.e., an insurer writing an umbrella policy, and the limit actually carried.

Gender rating – insurance rates are established based on actuarial statistics by gender usually found in automobile, life and health insurance.

Good student discount – a discount allowed by some insurers for students with high scholastic achievement.

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Hazard – a condition which may increase the chance of a loss occurring.

Homeowner policy – a policy referred to as a package policy providing coverage for the property and comprehensive personal liability. Premiums are not separately stated for each coverage and an individual coverage usually cannot be excluded. Named perils or direct physical loss unless excluded forms may be selected by the insured, commonly referred to as basic, broad, or special.

Homogeneous exposure – an insurance term used in the rate making process meaning that a large number of risks have similar characteristics and similar exposure to loss.

Hostile fire – a fire where it is not supposed to be as opposed to a friendly fire which occurs in the proper place such as a fireplace or stove.

Housekeeping – reference to the care and upkeep of property.

Hull – the body of a boat and usually includes sails, spars, fittings and all permanently attached equipment.

Hurricane – a windstorm of violent intensity involving a large area usually originating at sea and moving fairly slowly.

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Implied warranty – the policyholder implies that certain conditions exist and will remain in effect during the time coverage is effective; for example, a watercraft is seaworthy.

Improvements and betterments – additions made to real estate to increase its value.

In kind – an insurance term used to refer to replacement of damaged property with other property instead of cash.

Incendiary – a person who deliberately sets fire to property or a destructive fire intentionally set.

Increase in hazard – hazard in a risk that has been increased beyond what the risk was contemplated at the time the policy was written.

Indemnify – to reimburse for loss.

Independent adjuster – usually works for several companies adjusting their losses upon request and is paid for each loss adjusted rather than receiving a salary from one company as company adjusters do.

Independent agency system – agents who have a contract with several insurance companies to sell that company’s coverage, own the expirations, and represent the companies.

Independent agent – a property/casualty insurance producer who sells insurance for companies as an independent contractor. They are paid a commission for each policy written and their functions are not directed by the insurance company.

Indirect damage – consequential loss resulting from direct damage loss.

Indirect loss – a type of loss that is not the direct damage of a covered cause of loss or peril.

Inflation guard endorsement – an endorsement added to a homeowner policy for an additional premium which increases the limits of liability quarterly (by a percentage or a fixed amount) to offset inflation costs of construction.

Inherent vice – physical characteristics within a property which causes the property to deteriorate or become damaged; for example, paint will fade, paper will yellow, and metal rusts. This deterioration or damage is excluded in most policies.

Initial premium – known as a deposit premium usually based on the estimated initial premium quoted.

Injury – damage to a property or to a person.

Inland marine – insurance of property which is transported or could be easily transported.

Inspection – an examination of property to determine acceptability for insurance.

Inspector – someone who looks at property and provides a report on the condition of the property.

Installment premium – payment of premiums in installments over the policy term.

Insurable interest – a person must have a potential for financial loss before purchasing insurance.

Insurance – transfer of risk from one party (the insured) to another party (the insurance company). The insurance company promises to pay under certain conditions and for covered perils and the insured promises to pay the premium and meet certain conditions required of the insured in the policy language.

Insurance agency – an office selling insurance.

Insurance agent – a person licensed by the state and given authority by the insurance company to sell insurance.

Insurance company – an organization chartered by state law to write specified lines of insurance.

Insurance contract – an insurance policy detailing the coverage provided, limitations, conditions, exclusions and other details.

Insurance department – a state governmental office which enforces the insurance laws in that state.

Insurance policy – see insurance contract.

Insurance superintendent – a state official appointed by the governor, in some states, who has the responsibility of enforcing insurance laws and is responsible for the operations of the insurance department.

Insured – person(s) protected by the insurance policy. In property/liability policies some differences may exist between the named insured and other insureds.

Insured peril – cause of loss, such as fire, windstorm, hail, or accident, covered by an insurance policy.

Insurer – insurance company which provides coverage.

Insuring agreement – a portion of the policy which states what is covered, subject to limitations, exclusions, and conditions.

Intentional injury – injuries caused with intent to harm persons or property.

Intentional loss – a loss which occurs usually with the intent to collect insurance.

Inventory – a list of personal possessions, such as a listing of the contents and values in a person’s home.

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Jacket – some insurance policies are contained in a brochure-like cover and would include the declarations and policy forms.

Jewelry Floater – an inland marine policy covering jewelry wherever it may be located.

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Law of large numbers – a concept which suggests that the more times an event occurs, the more predictable the outcome is.

Lay up warranty – usually found in a boat policy stating that the boat will not be in use during a specified period of time.

Legal liability – liability imposed by law.

Liability insurance – covers an insured for those sums the insured may be legally obligated to pay as a result of the insured’s negligence.

Libel – written defamatory statements about another.

License – authority granted by the state to insurance agents, insurance companies, brokers, and in some states, loss adjusters permitting them to engage in the business of insurance.

Limit of liability – the most an insurer will pay for any one loss.

Limitations – limitations or exceptions to coverage according to the terms of the policy.

Line of business – classification of insurance written by insurers such as homeowners, personal automobile, mobilehome, dwelling fire, etc.

Local agent – a licensed and appointed representative selling insurance for an insurer.

Loss – an occurrence which causes an insurer to pay.

Loss control – steps taken to reduce, eliminate, or control the frequency of a loss occurring and to reduce the severity once the loss has occurred.

Loss department – the department within the insurance company dealing with claims, commonly referred to as the claims department.

Loss expectancy – an estimate made in predicting losses based on historical experience, data, and statistics.

Loss experience – history of losses for a line of business, an account, or a book of business. Loss experience usually includes the amount of loss, type of loss, dates of loss, and details of the losses.

Loss exposure – the potential of loss.

Loss frequency – the determination of how often a particular type of loss occurs usually based on one year.

Loss payable clause – a condition in a policy whereby the policyholder directs the company to pay any loss to a designated party. The check or draft is made payable to both the insured and the designated payee.

Loss prevention – loss control and inspection in an attempt to prevent loss from occurring.

Loss reduction – a measure taken in loss control to reduce severity of loss once it has occurred.

Loss report – a written statement containing the details of the claim made under an insurance policy.

Loss reserve – an insurer makes an estimate of the amount they expect to pay for a reported loss.

Lost policy release – a form signed by a policyholder to indicate that a policy has been lost or misplaced, thereby, releasing the insurer from liability under the insurance contract.

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Malicious mischief – intentional destruction and vandalism of property.

Manual – a book provided to agents by insurers which contains rules, rates, and other information necessary to write and service policies of insurance.

Manuscript policy – a policy designed to meet specific needs of a particular insured. The policy would usually contain non-standard forms.

Marine insurance – a type of insurance primarily written for property in transit. “Ocean” marine is written for property on the sea and “inland” marine is written for all other.

Marine perils – perils insured against in a marine policy and the wording of such perils have exact definite meaning.

Marketing representative – a representative of an insurance company whose purpose is to offer products and services to the agent.

Material fact – information given to an insurance company which influences whether or not insurance coverage will be written.

Maximum possible loss – the largest percentage of insured property which could be destroyed by covered perils.

Medical payments coverage – pays the medical cost to an injured party regardless of whether the insured is legally liable.

Minimum premium – the least amount of premium for which a policy will be issued or coverage provided.

Misrepresentation – the act of presenting misleading material facts to an insurance company to obtain a policy or collect for a loss by directly or indirectly lying. Misrepresentation as to material fact voids policies. Had the company known the truth, they may not have issued the policy or paid the loss.

Mobile home coverage – a policy written to meet the needs of a mobile home owner while the home is used as permanent residence.

Moral hazard – a condition by which an insured intends to profit from an insured loss.

Morale hazard – a condition which exists when an insured disregards safety and prevention of loss because insurance will provide coverage for a loss which may occur.

Mortgage clause – a condition in an insurance policy which affords certain rights to the mortgagee; e.g., loss payments will be made to the policyholder and the mortgagee as their interests may appear.

Multi-line insurance – a policy that provides a package of coverages within that one policy providing more than one line of insurance such as property and liability coverage.

Multi-peril insurance – a policy that insures more than one peril within the policy; e.g., an “all-risk” or “covered unless excluded” property policy is multi-peril.

Mutual insurance companies – an insurance company owned by its insureds instead of stockholders. A board of directors is elected by the insureds to run business operations. A mutual insurer is bound by the same state regulations as a stock insurer. The same types of solvency requirements exist.

Mysterious disappearance – the disappearance of insured property which cannot be explained. To avoid a dispute over whether property was mysteriously lost or stolen, some policies state that mysterious disappearance is presumed to be due to theft.

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Named insured – the person(s) designated in the policy as the insured, as opposed to unnamed persons who may have an interest in a policy.

Named perils policy – a policy that lists the exact causes of loss which will be covered.

National Fire Protection Association – the NFPA is an organization interested in the prevention of fire. The organization sets fire prevention standards and issues literature on the subject.

National Flood Insurance Act of 1968 – this act established a basis for flood insurance as a joint venture between the private insurance industry and the federal government. Since that time, the Federal Government has taken over the entire program.

Negligence – failing to exercise the care that an ordinary, prudent person would exercise.

No-fault automobile insurance – insurance that would compensate victims of automobile accidents without proving negligence on anyone’s part. No-fault laws vary greatly in those states which have such legislation but most provide that the victim’s own insurance will provide coverage and will allow a victim to sue in tort, once expenses or injuries pass a stipulated threshold.

Nonowned automobile liability insurance – provides coverage for the policyholder against liability while driving a nonowned vehicle. This coverage is usually automatically included in most personal automobile policies. Certain conditions or restrictions may apply.

Nonresident agent – insurance agents must be licensed in the state where they write business. If an agent writes business in states other than where they are domiciled, they are considered a nonresident agent.

Nonsmoker discount – a nonsmoker credit may be allowed on specific policies of insurance because statistics and data indicate nonsmokers have fewer health claims and property damage claims due to fire from carelessly disposed of tobacco products.

Notice of Loss – this is a notice submitted by an insured to the insurance company notifying them of a loss. Policy conditions state how long the insured has to notify the company of the loss and the information the loss notice must contain. Sometimes referred to as a first report.

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Occupancy – the use of a building.

Occurrence – a happening or event; in insurance, it may be a sudden happening such as an accident, or may be a repeated exposure to an adverse condition which is neither intended nor expected to cause injury or damage.

Ordinance or law coverage – an endorsement attached to a homeowner policy providing coverage for the three types of common building ordinance or law requirements; cost to demolish the undamaged part of a building, cost to clear the land of the debris after demolition, and cost to replace construction as required by law. These damages are usually excluded in the standard property coverage forms.

Ordinance or law exclusion – an exclusion found in most standard property coverage forms that clarifies there is no coverage for loss or damage as a direct result of the enforcement of any law or ordinance regarding construction, use or repair of property.

Original cost – the price paid to purchase the covered property.

Other insurance clause – a clause in an insurance policy stating the method used for apportioning the loss between two or more policies covering the same property at the time of loss.

Outboard motor and boat policy – a policy covering boats, motors, and equipment for named perils or at a higher price, “all risks”. This is considered a class of inland marine business.

Overinsurance – coverage purchased which is greater than the value of the property insured and would be greater than the loss sustained by the insured.

Ownership of expirations – the independent agent’s right to own the records of customers served by that agent as contrasted by an exclusive agent’s policyholders’ records that are owned by the insurer the exclusive agent represents.

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Package policy – a single policy which combines two or more separate policies into one contract with one premium.

Pair-and-set clause – a policy provision which, at the insured’s option, requires the insurer to restore or pay for the entire set of jewelry or fine arts when only part has been lost or damaged.

Parent company – the organization which owns or controls one or more subsidiaries.

Partial loss – the value of the loss is less than all the values insured.

Passenger bodily injury – injury, death, sickness, or disease sustained by a passenger.

Peril – cause of loss; example, fire, vandalism, wind.

Periodic payments – a method of spreading a claim payment over an extended period of time instead of paying in a lump sum.

Personal articles floater – “all risk” worldwide coverage for scheduled personal property.

Personal auto policy – a standard form for insuring private passenger autos and certain nonbusiness trucks.

Personal effects floater – an inland marine policy insuring personal articles, usually travelers, against “all risks” while away from home.

Personal injury – injury resulting from slander, libel, false arrest, wrongful entry, wrongful eviction, invasion of privacy; does not include bodily injury.

Personal lines – insurance written for individuals rather than businesses.

Personal property – property other than real property.

Personal property floater – an inland marine policy used to insure household items wherever they may be on an “all risks” basis.

Personal property of others – property other than real property that is not owned by the insured.

Physical damage – in automobile insurance, actual damage or loss to the vehicle itself; in property or liability insurance, physical injury to tangible property.

Physical hazard – danger of loss due to the condition, occupancy or use of property.

Pleasure use – in automobile insurance, a rating classification that indicates the vehicle is not used for business or drive to work or school.

Policy – the written contract of insurance.

Policy fee – a charge made by an agent in addition to the premium, which is kept by the agent, and, may be illegal under the insurance laws in some states.

Policy reserve – a percent of premium set aside by the insurer to pay claims.

Policy year – the year commencing with the effective date of the policy, as opposed to calendar year which always starts January 1.

Policyholder – the person(s) to whom a policy is issued and who pays the premium.

Premises – the building or section of a building containing insured property. It also may include adjacent areas.

Premises liability insurance – protection for the liability exposure that develops from the normal ownership, use, and maintenance of a premises.

Premium – an amount of money an insurance company charges to provide coverage.

Premium earned – the portion of the premium covering the period of time already used.

Premium payment mode – the payment method selected by the insured from the payment options offered by the insurer.

Primary insurance – the insurance policy responding first to any loss in excess of the deductible.

Private passenger automobile – any auto, pickup, or van not used for business purposes.

Probable maximum loss – the anticipated maximum property loss that could occur.

Producer – a person who sells insurance to the buyer and places it with the insurer. In most states, a producer is required to hold a state license and may be referred to as an agent.

Prohibited risk – a risk the company will not insure.

Proof of loss – a written statement of a claim giving the facts and data.

Property and casualty insurance – insurance written to cover property and liability as opposed to life and health insurance.

Property damage liability insurance – coverage for the insured’s legal liability for damage to property of others caused by the insured’s negligence.

Property insurance – insurance of real and personal property against physical loss or damage.

Pro rata cancellation – termination of an insurance policy for which the return premium is the full proportionate part of the unexpired term.

Prospect – a person to whom insurance might be sold.

Protection – fire departments and water supplies to fight fires. Real property is referred to as protected when located in an area served by a fire department.

Provisions – clauses within the insurance policy that clarify conditions, terms, or exclusions.

Proximate cause – the cause of the loss which results without any intervention of any other force.

Punitive damages – damages awarded separately and in addition to compensatory damages to serve as a punishment for the wrongdoer.

Pure premium – part of the premium which is used to pay losses and loss adjustment expense only.

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Rate – the unit of insurance price. All units in a policy multiplied by the rate per unit, produce the insurance premium. The unit may be each $100 of insurance, retail floor space, payroll, sales volume, etc. depending on the type of insurance sold.

Rate filing – a state insurance department document furnished by an insurer or a rating bureau providing detailed information on an insurance rate used or proposed. The department’s approval prior to using the rate is necessary in a prior-approval state.

Rate regulation – each state has its own insurance department that determines the type and degree of control that the state will have in the rate making process of insurers licensed to do business in that state. Some states require prior-approval while others may be file-and-use.

Rating bureau – or advisory organization, an association of insurers which makes rates for its affiliated insurers. They produce rating plans, schedule, manuals, policy forms, building inspections, and classifications by territory.

Real property – buildings and land.

Recovery – money which an insurance company gets back from salvage, subrogation against a third party, or reinsurance.

Redlining – canceling, non-renewing, refusing to insure, charging a higher rate, or limiting the amount of insurance solely because of the geographic locations of risks.

Regulation of insurance – state, federal, or local governmental control of the insurance business.

Reinstatement – putting coverage back into effect when the coverage has been cancelled or suspended.

Removal – taking property to another place other than the insured location to prevent loss.

Renewal – issuing a policy at the expiration date.

Renewal certificate – an insurance company issued document to the policyholder indicating that the policy to which the certificate refers is being renewed for another year.

Rental reimbursement coverage – personal auto coverage endorsement to provide reimbursement for expenses when an insured rents a temporary replacement vehicle because of a covered accident to the insured’s vehicle.

Renters insurance – property and liability coverages, similar to a homeowner policy. Even though the renter does not own the building, they could incur loss to personal contents and would need personal and premises liability coverage. Endorsements are also available to add or increase coverage.

Replacement cost coverage – pays to restore or replace the damaged property without deduction for depreciation.

Representation – information given by the prospective insured to the insurance company which will influence the company underwriting decision.

Reserve – an amount representing the insurer’s liability.

Residence employee – an employee who works in and around the insured premises.

Retention – an amount the insured assumes which is not insured otherwise.

Return premium – part of the premium that is returned to the insured as the result of cancellation, rate adjustment, or payment made in excess of the actual premium.

Rider – endorsement.

Riot insurance – insures against damage done by rioters or those engaged in civil commotion.

Risk – chance of loss, the reason people buy insurance. Also the subject of insurance such as the building or liability exposure insured.

Robbery – taking property by violence or threat of violence.

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Safe driver rating – insureds with clean driving records qualify for lower car insurance premiums. Insureds with accidents and violations pay higher premiums. This is done by assigning a point system and the points usually stay on the policy for three years.

Scheduled personal property endorsement – an endorsement can be attached to a homeowner policy to schedule coverage and value on specific items of personal property.

Seasonal risk – a summer dwelling or a residence which is occupied only part of the year.

Selection – accepting or rejecting risks in an attempt to produce an underwriting profit.

Snowmobile insurance – insurance written to cover snowmobiles against physical damage and legal liability for their use and operation.

Solvency – State insurance departments are responsible for assuring the solvency of insurers licensed to write insurance in their state. Solvency is whether or not an insurer has the funds to pay claims.

Special form – a property coverage form that provides coverage from all causes of physical damage unless excluded or limited.

Specified perils – covers only those perils that are listed as covered in the policy contract.

Split limits – separate liability limits stated for each coverage such as one limit for bodily injury and another for physical damage found in an automobile policy.

Standard provisions – insurance contract provisions that are typically found to use similar language in contracts of most insurers, for example, other insurance, duties in the event of a loss, and cancellation/nonrenewal conditions.

Statute of limitations – a statute limiting the time legal action may be brought.

Subrogation – the substitution of the insurer for the insured to pursue any rights the insured has against a third party liable for a loss paid by the insurer.

Suit – a civil proceeding brought by one party against another party for alleged damages.

Surplus – the amount remaining after a company’s liabilities are deducted from its assets.

Surplus lines insurance – insurance written by insurers not licensed in the state where the risks are written. State law requires that placement could not be readily made in licensed insurers.

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Tenants policy – a policy written for persons who rent their living quarters.

Term – the length of time for which a policy is written.

Termination – the cessation of coverage caused by expiration of the policy or by cancellation or nonrenewal. Cancellation may be at the insured’s request, the request of the insurer due to increased hazards, losses, lack of compliance with safety recommendations, or for nonpayment of premium.

Territorial rating – rates and classifications based on physical, environmental, and overall loss potential of geographic locations.

Theft – the wrongful taking of the property of another.

Third party – the first two parties under a liability policy are the insured and the insurer, the claimant would be the third party.

Tort – a legal wrong arising from a breach of duty causing injury to persons or property.

Tort law – the area of civil law that involves tort actions.

Total loss – loss of all the insured property, or, under a given policy, the maximum amount for which the policy is liable.

Towing coverage – an extension of coverage under an automobile policy that covers the cost of towing the insured car or provides emergency road service.

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Unfair Discrimination – making distinctions is essential in the insurance system to match individual risks with rates appropriate for their class. Factors such as a person’s race, color, creed, or national origin that are unrelated to the chance of loss should not affect the writing of insurance. Unfair discrimination is illegal.

Uninsurable risk – a risk that cannot be insured because of the possibility of high frequency of loss or the cause of loss is considered illegal, criminal, or against public policy.

Uninsured Motorists Coverage – protection for the insured against bodily injury or, in some states, property damage caused by the negligence of an uninsured or underinsured motorist.

Unoccupied dwelling – a dwelling where the occupants are temporarily absent but furniture and personal effects remain, as opposed to a vacant dwelling, which has neither occupants nor contents.

Unscheduled property floater – provides blanket special property coverage on all related property of a certain type.

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Vacant building – a building with nothing in it. If there are contents in the building and the owner intends to return, the building is unoccupied.

Valuation - the act of determining the worth of an item of real or personal property.

Vandalism - malicious damage done, also called; malicious mischief.

Vicarious - when one party is held responsible for the actions of another party based solely on the relationship of the two parties.

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Warranty – a statement by the insured on a literal truth of which the insurance contract depends.

Workers Compensation insurance - provides benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws that require this protection for workers.

Worldwide coverage - policy provisions or endorsements that broaden the policy territory to provide coverage worldwide.

Written premiums - the premiums on all policies which a company has issued in a period of time, as opposed to earned premium.

Wrongful death act - A law in some states that permits possible recovery from the party causing the death, of legally recoverable special and/or general damages.

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Yacht – a larger pleasure use vessel, as distinguished from a motorboat, sailboat, or commercial vessel.

Yacht insurance - marine insurance designed to provide property damage or hull coverage for yachts, cabin cruisers, and sailing vessels.

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