Insurance Glossary

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ACT OF GOD
A direct, violent sudden act of nature that could not have been foreseen such as floods or earthquakes.
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.
ADDITIONAL INTEREST INSURED
A company or person who has been named as an additional interest insured on a policy can be liable for an accident that involves an insured person or vehicle. For example, a lienholder can be an additional interest insured.
ADDITIONAL LIVING EXPENSES
Coverage under a Homeowners, Condominium, or Renters policy, that reimburses costs of residing in a temporary location until the insureds home can be made whole again. I usually provides living expenses from 10%-20% of the structural coverage on the home
ADJUSTER
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
ADMITTED COMPANY
An insurance company authorized to do business in California and subject to regulation by the California Department of Insurance.
AGENT
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
AMOUNT OF INSURANCE
The limit of payment for which an insurer is liable under a policy.
ANTI-THEFT DEVICE
A device, either active or passive, that attempts to prevent vehicle theft. Active anti-theft devices can track and recover a vehicle and automatically contact a response center to begin the vehicle recovery process. Passive anti-theft devices attempt to prevent theft by using sophisticated electronic car alarms, simple steering wheel locks, etc.
APPRAISAL
A survey to determine a property’s insurable value, or the amount of a loss.
APPRAISAL CLAUSE
A clause in an insurance policy that gives the insurer the right to demand an appraisal on the damaged property. It gives both the insurer and insured a means of settling disputes over the value of lost or damaged property.
APPRAISER
A Person that determines the real value of property or damage to covered property.
ARBITRATION
Reference of a dispute to one or more impartial persons chosen by the parties to the dispute to determine their rights and/or obligations. The parties agree in advance to abide by the arbitrament. Each party has a chance to be heard.
ARSON
The deliberate and intentional burning of property by its owner or by another person.
AUTO INSURANCE PREMIUM
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day—rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information.
BENEFICIARY
The person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs.
BINDER
Temporary authorization of coverage issued prior to the actual insurance policy.
BODILY INJURY
Pays medical costs of others and your legal defense costs if your car injures or kills someone. The limits or maximum the company will pay are stated on the declarations page. Typically the limit is per person and total per accident.
BRICK VENEER CONSTRUCTION
Frame construction with a single course of brick as an outside covering.
BROKER
A broker-agent acting in the capacity of an insurance broker is an independent insurance sales person who searches the marketplace in the interest of clients, not insurance companies, and may place coverage with any admitted insurance company.
BUILDING CODES
Rules and regulations of governmental bodies defining standards that construction in that jurisdiction must meet.
BURGLAR ALARMS
Devices of various types that give warning of entry into premises by unauthorized persons.
BURGLARY AND THEFT INSURANCE
Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
BUSINESS USE
Using a private passenger vehicle owned or leased by the applicant in the course of his or her business or profession. Acceptable business use classifications vary by company.
CANCELLATION
The termination of insurance coverage during the policy period.
CAPTIVE AGENT
A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company.
CAR ACCIDENT
An unexpected and unintended event from the standpoint of you or a permissive user that causes bodily injury or property damage and arises out of the ownership, maintenance or use of a car or other motor vehicle.
CAR OR AUTO
A 4-wheel motor vehicle licensed for use on public roads.
CAR YEAR
Equal to 365 days of insured coverage for a single vehicle. It is the standard measurement for automobile insurance.
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.
CARGO
Goods being transported, such as the load of a truck or the goods being carried by a ship. The cargo of a ship does not include the equipment needed to operate the ship.
CASE MANAGEMENT
A system of coordinating medical services to treat a patient, improve care and reduce cost. A case manager coordinates health care delivery for patients.
CIVIL COMMOTION
Disturbance involving a large number of individuals. An uprising of people creating a prolonged disturbance.
CLAIM
A person's request for payment by an insurer for a loss covered under a policy. Your claims to your company are first party claims. Claims made by one person against another person's company are know as third party claims.
CLAIMANT
The person making a claim
CLAIMS EXAMINER
An employee of an insurer who handles and is responsible for handling claims.
CLAIMS MADE POLICY
A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities.
CLAUSE
Words in a policy that describe certain specifications, limitations or modifications.
COLLISION COVERAGE
When your insured vehicle overturns or collides with another object, Collision coverage pays for the damage to your vehicle. Collision coverage also may extend to a non-owned vehicle or one rented for personal use that is in your custody or that you are operating. Certain exclusions may apply. Refer to your policy.
COMMISSION
Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.
COMPREHENSIVE COVERAGE
If your insured vehicle is damaged due to an event other than a collision, Comprehensive coverage will pay for the damage. This includes damages from fire, theft, windstorm, flood and vandalism. If your vehicle is stolen, Comprehensive covers transportation and loss of use expenses when applicable
COMPULSORY AUTO INSURANCE
The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.
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, provisions 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 etc. The insured, for example, is required to give notice of a claim and fulfill certain other obligations as a condition precedent to his receiving a settlement.
CONDITIONS OF THE CONTRACT
Articles in contract defining or describing terms, responsibilities of owner and contractor, performance and payment schedules, and the like.
CONDOMINIUM
Is the individual ownership of 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 an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.
CONSEQUENTIAL LOSS
The word "consequential" means something following as an effect or result. It is an indirect result of the occurrence that causes the loss
CONSIDERATION
The inducement to a contract; the cause, motive or price which induces a contracting party to enter into an agreement, act or forbearance or promise thereof. It is an essential part of a binding contract. Consideration is either expressed or implied. The money, or whatever is being used in substitution of money, paid for the article or contract is "the consideration."
CONTINUOUSLY INSURED
Being continuously insured means your insurance coverage from an insurer or more than one insurer was in effect at all times, without a break or lapse in coverage for any reason.
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.
CONTRACT DOCUMENTS
Agreement, addenda, supporting documents, general conditions, supplementary conditions, specifications and drawings and modifications to an agreement.
CONTRIBUTORY NEGLIGENCE
Many accidents are the fault of both parties who are involved in the occurrence. The plaintiff who sues another party for damages also may be guilty of some negligence, which is a concurrent cause of the damage.
COVERAGE
Synonym for insurance.
CRASH PARTS
Sheet metal parts that are most often damaged in a car crash.
CREDIT REPORT
A report provided by a commercial credit reporting company that provides details on the reputation and financial strength of an individual or corporation.
CREDIT SCORE
The number produced by an analysis of an individual’s credit history. The use of credit information affects all consumers in many ways, including getting a job, finding a place to live, securing a loan, getting telephone service and buying insurance. Credit history is routinely reviewed by insurers before issuing a commercial policy because businesses in poor financial condition tend to cut back on safety, which can lead to more accidents and more claims. Auto and home insurers may use information in a credit history to produce an insurance score. Insurance scores may be used in underwriting and rating insurance policies.
CUSTODY
Immediate control that an authority exercises over property or people.
DECLARATIONS PAGE (DEC PAGE)
Also known as an auto insurance coverage summary, this page is provided by your insurance company and lists the following: Types of coverage you have elected, Limit for each coverage, Cost for each coverage, Specified vehicles covered by the policy, Types of coverage for each vehicle covered by the policy, Other information applicable to the policy
DAMAGES
The cost of compensating those who suffer bodily injury or property damage from a car accident. These damages may be payable up to the limits of liability as shown on the declarations page.
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
Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information. Referred to as the “dec page.”
DECLINE
The company refuses to accept the request for insurance coverage.
DEDUCTIBLE
The amount that you agree to pay, per claim or per accident on comprehensive or collision coverage. This is subtracted from the total amount paid by your insurer. If the claim is $1500 and your deductible is $500, you pay $500 and the insurance company will pay the remaining $1000. The higher the deductible, the lower your premium will be.
DEDUCTIBLE CLAUSE
A clause defining the amount of loss for which insured is liable; defines insurer's and insured's contributions to cover losses.
DEPRECIATION
A decrease in value due to age, wear and tear, etc.
DIRECT BILLING
A system for the collection of premiums whereby the insurance company "directly bills" the insured for the premium in lieu of the conventional collection of premiums by the agent or broker. The insurer sends a statement to the agent, usually monthly, recording the premiums collected directly, and credits the agent with the commission on those items.
DISCLOSURE
Act of making known something known.
DRIVER IMPROVEMENT COURSE
Drivers age 55 and older can take a voluntary driver improvement course to refresh and enhance their driving skills. Taking this course may qualify these drivers for a discount if they meet eligibility requirements.
DRIVER STATUS
People can be added to policies with the following types of driver status: Rated – Actively drive vehicles on the policy, Excluded – Not allowed to drive vehicles on the policy and will not be covered under your policy in the event of an accident, Listed – Residents of the household who do not drive the vehicles on the policy (such as a roommate)
DWELLING
The living quarters occupied, or intended for occupancy, by a household.
EARNED PREMIUM
A portion of premium earned or charged for the period of time a policy remained effective.
EARTHQUAKE INSURANCE
Insurance against damage by earthquake.
EFFECTIVE DATE
The date of inception of an insurance policy, or the date additional coverages become effective.
ENCUMBRANCE
Mortgage, lien or other charge against a property.
ENDORSEMENT
Basically, it is an amendment or change to a policy that adds or subtracts insurance coverage. (For example: A request that you make to your broker to add drivers or delete coverage results in an endorsement to your policy).
ESTATE
The net worth of an individual's assets.
ESTIMATE
Costs a contractor anticipates for a project.
ESTIMATED PREMIUM
A tentative premium set in the anticipation of being approximately correct but which may be increased or decreased when the final premium calculation is made.
EXCLUSION
A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.
EXPERIENCE
Record of losses.
EXPIRATION DATE
The date on which the policy ends.
EXPOSURE
The hazard threatening a risk because of external or internal physical conditions.
EXTENDED COVERAGE
An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
EXTENDED REPLACEMENT COST COVERAGE
Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction.
FACE BRICK
Brick, chosen for its visual rather than its structural characteristics, used on wall's exposed surface.
FAIR MARKET VALUE
Price at which a buyer and seller, under no compulsion to buy or sell, will trade.
FIRE DAMAGE
Damage caused by fire.
FIRE INSURANCE
Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
FIRE RESISTANT
A fire resistant building or article is generally designed to resist certain higher heat temperatures for a certain period of time. It has a lesser degree of resistance to fire and ranks slightly more hazardous than "fireproof."
FIRST-PARTY COVERAGE
Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services.
FIXTURES
Anything that is attached to real property is known as a "fixture." Fixtures when permanently attached to real property become part of the real property. Tenant's fixtures are fixtures of a removable nature and are the responsibility of the tenant for insurance purposes. Whether a fixture is a tenant's fixture and movable or a landlord's fixture and immovable is frequently determined by the purpose of the fixture.
FLAMMABLE
Easily set on fire.
FLAT CANCELLATION
The cancellation of a policy as of the effective date with all paid premium refunded.
FLOATER
Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items.
FLOATER POLICY
A policy covering the same risk at a number of perhaps unspecified locations possibly over a wide area (even world-wide); usually includes goods being frequently moved from one location to another, e.g., Fur Floater, Jewelry Floater, etc.
FLOOD INSURANCE
Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy.
FRAME
Refers to the construction of a building built using lumber.
FRAUD
Methods used to deceive to cause unwarranted favorable decision for one's own benefit. Deliberate misrepresentation or misstatement to conceal facts which should at the time be made known.
FRAUDULENT
Dishonest; based on or obtained by fraud.
FRAUDULENT MISREPRESENTATION
A false statement made knowing it to be false and intending another to act on it to his detriment, or made carelessly or recklessly without regard to whether it is true or false.
FREQUENCY
Number of times a loss occurs. One of the criteria used in calculating premium rates.
FULL COVERAGE
"Full coverage" is a common term that people use to describe how much auto insurance coverage they have. Though there is no such thing as "full coverage," it often implies that the policy has more than just Liability coverage.
GAP INSURANCE
An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars.
GARAGING LOCATION
A garaging location is the place you primarily park your vehicle when you're not using it. Generally, this is your primary residence.
GENERIC AUTO PARTS
Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical part produced by the OEM.
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.
GRACE PERIOD
For insurance premium payments, a specified length of time following a premium due date within which the renewal premium may be paid without penalty. The length of the grace period is specified in a grace period provision that is found in a life insurance, health insurance, or annuity policy.
GRADUATED DRIVER LICENSES
Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict nighttime driving. Young drivers receive a learner’s permit, followed by a provisional license, before they can receive a standard driver’s license.
GUARANTEED REPLACEMENT COST COVERAGE
Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit.
HABITATION
Dwelling place; residence.
HAZARD
A condition that increases the chances of a loss.
HOMEOWNERS POLICY
A multi-peril insurance policy for dwelling risks, combining coverages for fire, and extended coverages including theft, and liability.
HOUSE YEAR
Equal to 365 days of insured coverage for a single dwelling. It is the standard measurement for homeowners insurance.
IDENTITY THEFT INSURANCE
Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney's fees to defend against lawsuits and remove criminal or civil judgments.
IMPROVEMENTS AND BETTERMENTS
Additions or changes to a rented premises by a tenant at his own expense. Also called Tenant's Improvements.
IN FORCE
Insurance policy which is in effect, and has not expired or been cancelled.
INCEPTION
The date and time on which coverage under an insurance policy takes effect.
INDEMNIFY
To provide compensation for loss or expenses incurred.
INDEMNITY
A contract, expressed or implied, to repay in the event of a loss. Insured neither gains nor loses.
INDEMNITY PERIOD
The policy period.
INDEPENDENT ADJUSTER
One who adjusts losses on behalf of insurance companies, but is not employed by any one insurance company.
INSURABLE INTEREST
Owner of property has an insurable interest because of the expectations of monetary loss if that property is damaged or destroyed.
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 COMPANY
A company that, in exchange for a fee (known as a premium), agrees to pay all legitimate claims that may arise under your policy.
INSURANCE POLICY
A written contract of insurance.
INSURANCE SCORE
Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race.
INSURANCE-TO-VALUE
Insurance written in an amount approximating the value of the insured property.
INSURED
The policyholder - the person(s) protected in case of a loss or claim.
INSURER
The company providing the insurance coverage.
INSURING CLAUSE
Describes the intent of the policy, just what insurance coverage is provided by the policy and in what limits.
INTERMEDIARY
The agent/broker negotiating insurance contracts for another or any party representing another party, in negotiation with a third party.
INTERNET INSURER
An insurer that sells exclusively via the Internet.
INVENTORY
Itemized list of goods and property on hand.
JUDGMENT
An order given by a Court.
JURY
A body of persons selected from the general population sworn to hear evidence in a law case and to make a decision according to their findings.
LAPSE
An insurance policy that, having reached its expiration date, is not renewed or extended is said to have lapsed.
LATENT DEFECT
A defect that is not apparent. A hidden defect.
LEASE
A contract by which one party, called the lessor, conveys to another, called the lessee, real estate, equipment or facilities for a specified term and for a specified rent.
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 COVERAGE
A promise from an insurance company to pay for damages (within the limits stated on the policy) for bodily injury or property damage for which the law holds the policyholder responsible because of an accident involving an insured car. In California, the minimum requirements are $15,000 per person, $30,000 per accident and $5,000 in property damage.
LIABILITY INSURANCE
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
LIABILITY LIMITS
The maximum amount of insurance provided under a policy of liability insurance. There may be different limits for bodily injury and property damage, or, more commonly, a single amount for all claims for bodily injury or property damage arising from one accident or occurrence. Claims handling and adjusting expenses, costs of legal defense and prejudgment interest are normally payable in addition to the liability limits stated in the policy.
LIEN
A charge upon real or personal property as security for some debt or duty. Also, the security interest created by a mortgage. The conditions of an insurance policy require the disclosure to the insurer of any existing lien on the insured property.
LIMITS
An insurance coverage limit is selected by you and is the most an insurance company will pay for damages or injuries that apply to the coverage. Most states have laws that specify the minimum limit that must be purchased for each required insurance coverage.
LIMIT OF LIABILITY
The maximum amount, as stated in the policy, which an insurer is bound to pay in case of a loss. See also Liability Limits.
LOSS
A word often used in place of the word "claim." It refers to the amount an insurer must pay because one of the possibilities of loss insured against under a policy, has happened.
LOSS COSTS
The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
LOSS OF USE
A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
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 the result of an accident. In a homeowner's policy it might refer to additional living expense when the insured premises are rendered uninhabitable by an insured peril.
LOSS PAYABLE CLAUSE
A policy clause providing, at the direction of the insured, that in the event of a loss, payment shall be made to an interested party other than the insured, e.g., a mortgagee.
LOAN/LEASE PAYOFF COVERAGE
Loan/Lease Payoff coverage, sometimes called "gap" coverage, pays the difference between what you owe on your vehicle and what your insurance pays if your vehicle is declared a total loss or stolen and not recovered, less your Comprehensive or Collision deductible.
MALICIOUS MISCHIEF
Injury to the rights or property of another person or property with intent.
MARKET VALUE
The value of an asset based on a current market valuation, e.g., the amount for which the item could be sold on the open market.
MASONRY CONSTRUCTION
A form of construction identified by self-supporting walls of masonry, e.g., brick, stone or hollow concrete block, but with floors and roofs which may be constructed of combustible materials, usually wood.
MATERIAL FACT
Something affecting a contract of insurance important enough to change the agreement between the company and the policyholder. Material facts must be disclosed if asked about. Failure to do so may result in a voiding of the policy involved.
MATERIAL MISREPRESENTATION
The policyholder or applicant makes a false statement of any material (important) fact on their application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged or makes a false statement about the annual miles driven.
MEDICAL EXPENSES
An insurance company’s promise to pay medical expenses for your bodily injury, sickness, disease or death suffered in car accident while occupying a car or from having been struck by a motor vehicle.
MEDICAL PAYMENTS (MEDPAY) COVERAGE
MedPay is an optional insurance coverage that pays for reasonable and necessary medical and funeral expenses for covered persons. These expenses must be incurred as a result of an auto accident.
MEDICAL PAYMENTS INSURANCE
A provision in an insurance policy to pay certain specified medical expenses of others irrespective of the insured's legal liability.
MINOR
A person under the age of being legally capable of transacting business on his own behalf.
MISREPRESENTATION
An incorrect statement made about a material fact. Misrepresentation can be innocent, e.g., arising from an oversight; fraudulent (in other words, a deliberate untruth with intent to deceive) or the result of extreme carelessness where a statement is made without regard to whether it is true or false. When a misrepresentation is discovered, the insurer may either continue the contract or treat the contract as void with a full return of any premiums paid. In order for the insurer to successfully treat a policy as void, the misrepresented fact must be material to the risk.
MORAL HAZARD
Danger of loss arising from the nature of the insured rather than from the physical nature of the risk. This would encompass those instances where the chance of loss is increased by an insured's carelessness, incompetence, recklessness, indifference to loss or an insured's fraudulent nature.
MORTGAGE CLAUSE
A clause in an insurance policy which stipulates the rights and obligations of the insurer and the mortgagee. The main characteristics of this clause are that the mortgagee is granted protection in the event a loss is denied due to the actions of the insured (provided that the mortgagee was not aware of the insured's wrongful action) and, in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware.
MOTORIST PROTECTION
Reimbursement for towing up to specified coverage limit each time a covered auto is disabled. This coverage does not apply to towing of a covered auto due to a parking violation. Also included in motorist protection is emergency transportation. The company will reimburse an insured up to the specified coverage limit for the costs of emergency transportation from the place of a covered accident arising out of the operation, maintenance or use of a covered auto to: such place as the emergency may require, the intended destination, the insured's residence
MULTIPLE PERIL POLICY
A package policy, such as a homeowners or business insurance policy, that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy. In the early days of insurance, coverages for property damage and liability were purchased separately.
MULTIPERIL POLICY
A policy THAT is a combination of fire and casualty (or fire, casualty and inland marine coverages) in a single contract such as the Homeowner's Policy.
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
Peril specifically mentioned as covered in an insurance policy.
NATURAL DISASTER
A disaster caused by the elements such as flood, earthquake, tornado, lightning, etc.
NEGLIGENCE
Failure to act with the legally required degree of care for others, resulting in harm to them.
NO-FAULT
Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation.
NON-DISCLOSURE
A contract of insurance is based on utmost good faith. An applicant for insurance is required to disclose to the company all material facts that are necessary to underwrite a policy. If the applicant does not disclose all these facts, he/ she is guilty of non-disclosure and may risk having coverage voided from inception.
NON-INSURABLE RISK
A risk for which no insurance can be written. The chance of loss is very high or cannot be accurately measured.
NON-OWNERS POLICY
This coverage may be issued to someone who does not own an automobile, does not lease a vehicle or have a vehicle furnished for their regular use. This policy will not provide coverage for your use of a family member's vehicle. This insurance covers the named insured as a driver only. A non-owners policy does not provide any physical damage coverage on the car the insured is driving.
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. 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.
NOTICE OF TERMINATION
The conditions of insurance policies stipulate how a policy may be terminated during its term. For example, a policy may be terminated by the insured at any time or by the insurer who must give the insured a certain number of days' notice of termination by registered mail or a certain lesser number of days' written notice of termination personally delivered.
NULL AND VOID
Of no legal or binding force; invalid.
OCCASIONAL DRIVER
A person who is not the primary or principal driver of the insured vehicle is an occasional driver.
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 POLICY
Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later.
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.
OTHER INSURANCE
Normally an insured must disclose to an insurance company from whom he is purchasing insurance, information about what insurance he already carries on the property.
OUT OF STATE INSURANCE
If the policy provides liability coverage and you're traveling in a state that has mandatory motor vehicle insurance requirements, the insurance company will automatically provide the minimum limits of liability as required by the applicable state law.
OWNER'S, LANDLORD'S AND TENANT'S LIABILITY
Liability insurance coverage which gives protection because of liability arising out of ownership, use or occupancy; operation or maintenance of buildings or premises.
PACKAGE POLICY
A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.
PARTIAL LOSS
A loss covered by an insurance policy where the property or the premises are not completely destroyed or rendered completely worthless.
PERIL
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
PERJURY
Giving false evidence or information while under oath.
PERSONAL ARTICLES FLOATER
A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.
PERSONAL EFFECTS FLOATER
A policy covering personal effects usually to cover jewelry, furs, etc.
PERSONAL INJURY LIABILITY
Injury other than bodily injury arising out of defined causes which usually include false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander or violation of a person's right to privacy other than in the course of advertising, broadcasting, television, publishing.
PERSONAL INJURY PROTECTION (PIP) COVERAGE
PIP is a coverage in which the auto insurance company pays, within the specified limits, the medical, hospital and funeral expenses of the insured person, people in the insured vehicle and pedestrians struck by the insured vehicle. PIP is the basic coverage implemented in no-fault automobile insurance states.
PERSONAL LINES
Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies.
PERSONAL PROPERTY
Legally, any property of an insured other than real property. More often used to refer to the personal property of family members insured under a Homeowners policy.
PERSONAL PROPERTY FLOATER (P.P.F.)
A Broad Form policy covering all personal property worldwide including at the insured's home, usually on an all risks basis.
POLICY
A written contract for insurance between an insurance company and policyholder stating details of coverage.
POLICY CONDITIONS
Provisions that state the rights and duties of the insured or insurer.
POLICY EXPIRATON DATE
Your current insurance policy ends on your policy expiration date, which is found on your current policy documents, Declarations Page (Dec Page), insurance identification card or recent cancellation notice. This date should not be confused with payment due dates.
POLICY LIMIT
The maximum that the insurance company is obligated to pay in actual claims under an insurance policy. Certain additional costs may also need to be paid.
POLICY PROVISIONS
Statements contained in an insurance policy that explain the benefits, conditions and other features of the insurance contract.
POLICY TERM
The length of time your policy is active and in force is your policy term.
POLICY YEAR
Period between anniversary dates.
POLICYHOLDER
Individual or other entity that owns an insurance policy. The insured.
POWER OF ATTORNEY
Authority given one person or organization to act for and obligate another to the extent of the instrument creating the power.
PREMISES
The particular location of the property or a portion of it as designated in an insurance policy.
PREMIUM
A premium is the amount of money paid to an insurance company in return for insurance protection.
PREMIUM FINANCING
A policyholder contracts with a lender to pay the insurance premium on their behalf. The policyholder agrees to repay the lender for the cost of the premium, plus additional interest and fees.
PRIMARY RESIDENCE
A primary residence is the place where you will live for the majority of your policy term.
PRIMARY USE
Primary use is how you mainly use your vehicle. Primary use options include to/from work, business, pleasure or farm use.
PRINCIPAL DRIVER
The person who drives the car most often is the principal driver.
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.
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.
PROPERTY/CASUALTY INSURANCE
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.
PROPERTY DAMAGE
This insurance covers property damage that results from a car accident. Property damage means damage to or destruction of physical property, including the loss of use of that property. The maximum that will be paid by an insurance company for any one accident is stated on the declarations page.
PROPERTY DAMAGE LIABILITY COVERAGE (PD)
If an insured person is legally liable for an accident, PD coverage pays for damage to others' property resulting from the accident. PD also pays for legal defense costs if you are sued. Certain exclusions may apply. Refer to your policy.
PROPERTY DAMAGE LIABILITY INSURANCE
Protection against liability for damage to the property of another including loss of the use of the property.
PROPERTY INSURANCE
Covers an insured's property against damage, destruction or loss by a covered peril.
PROXIMATE CAUSE
Cause of loss or damage. Unbroken chain of cause and effect between the occurrence of an insured peril and damage to property.
PUNITIVE DAMAGES
Damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or willful character of his wrongdoing.
QUOTE
An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.
RATE
The rate is the premium for a specified amount of insurance for a specified time period.
REFUND
A return to the policyholder of part of the paid premium, because of cancellation, suspension, reduction in insurance coverage, or because of rate reduction.
REINSTATEMENT
The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.
RELEASE
A discharge from obligation or responsibility. To let go of, or give up a legal claim. The most common types in insurance are: First Party Release - between the insured and the insurance company. Third Party Release - between the insured and a third party. Indemnifying Release - between the insured and a guardian for a minor or other person not legally competent.
REMOVAL
The standard fire insurance policy insures against damage done in removing the insured property from the path of the fire or other insured peril (if loss is mitigated).
RENEWAL
A certificate that attests to the fact that an insurance policy has been extended for another term.
RENEWAL PREMIUM
The premium for the new term of the policy.
RENTAL REIMBURSEMENT COVERAGE
Rental Reimbursement provides rental car coverage if you have a claim that is covered under Comprehensive or Collision coverage. Daily rental amounts are subject to the limit purchased.
REPAIRS
Generally an insurance policy will set out the conditions for an insured to effect repairs to insured property.
REPLACEMENT
Most policies of insurance of property give the company the right to substitute other property of like kind and quality for insured property which has been damaged or destroyed. This is making a replacement.
REPLACEMENT COST
Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
REPLACEMENT COST CLAUSE
Applies generally to some fire insurance policies where a special cover may be purchased so that in the event of fire, repairs or replacement will be made with material of like kind without cost to the insured for depreciation or betterment.
REPLACEMENT VALUE
The cash value representing what it would cost to replace the particular article that is the subject of the insurance.
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.
ROADSIDE ASSISTANCE COVERAGE
Roadside Assistance provides services such as towing, flat tire change, locksmith service and battery jump-start to customers, who can elect the service for an additional premium if it is not already included with their insurance policy.
SALVAGED VEHICLE
A salvaged vehicle is a vehicle that has been wrecked, destroyed or damaged, to such extent that the insurance company considers it uneconomical to make repairs to the vehicle and the vehicle is not repaired by or for the person who owned the vehicle when the damage occurred. The title will often note SALVAGED VEHICLE when issued by the department of motor vehicles. Many companies will only accept salvaged vehicles for liability coverage.
SCHEDULE
A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
SCHEDULED PROPERTY FLOATER
An inland marine form of policy specifically insuring various individual items. Articles of unusual value, provided they are movable, may normally be written this way and insured against many hazards, often against "all risks."
SEASONAL RISK
A risk occupied only part of the year, such as a summer dwelling.
SECOND NAMED INSURED
The named insured or listed agent/broker on a policy may request to designate any other person listed on the policy as a second named insured. The second named insured has the same coverage under the policy as the named insured.
SETTLEMENT
An agreement between concerned parties. In insurance, the agreement is usually on the money changing hands to discharge an insurance claim.
SEWER BACK-UP COVERAGE
An optional part of homeowners insurance that covers sewers.
SHORT-RATE CANCELLATION
When the policy is terminated prior to the expiration date at the policyholder's request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish its own short-rate schedule
SLANDER
The oral utterance or spreading of falsehood harmful to another's reputation. Libel is written; slander is spoken.
SMOKE DAMAGE
Essentially, the devaluation by smoke, not fire, of merchandise and property. Such damage is covered by the fire policy.
SR-22
An SR-22 is a document required by the court that demonstrates proof of financial responsibility for persons convicted of certain traffic violations.
STATEMENT OF CLAIM
A written statement by a plaintiff detailing the facts that support the claim against the defendant and the relief sought.
STATUTE
An act of the legislature. Common law is made up of the various court decisions over the years. Case law may be altered by statute.
STATUTE OF LIMITATIONS
Law determining the period within which a specific legal action must be taken.
STORAGE
A term applied to articles or substances held for safekeeping. If storing of such articles is prohibited by a policy, the policy will be voided if loss consequently occurs, unless the company's permission and consent has been specially granted.
SUBCONTRACTOR
A trade contractor such as a roofer who usually subcontracts with a general contractor.
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.
SUIT
A legal proceeding brought by one person against another.
SUPPLEMENTAL COVERAGE
An amount of coverage that adds to the amount of coverage specified in a basic insurance policy.
SURCHARGE
An extra charge applied by the insurer. For automobile insurance, a surcharge is usually for accidents, moving violations or a sports type vehicle.
SURRENDER
Cancellation of a policy before its normal expiration by mutual consent of insured and insurer.
TENANT'S 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.
THIRD PARTY
A claimant under a liability policy, so called because he is not one of the two parties (insured and insurer) who has entered into the insurance contract which pays his claim.
THIRD-PARTY ADMINISTRATOR
Outside group that performs clerical functions for an insurance company.
THIRD PARTY INSURANCE
A fire policy insures the policyholder against loss or damage to his own property. When a policy insures a person against the liability he may incur to another for damages, it is "Third Party Insurance." The insured is indemnified with respect to any loss which he might suffer as a result of his legal liability to others arising out of the peril against which insurance is written.
TITLE
The right to ownership of property. The owner of real property having just possession of his property.
TOTAL LOSS
The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
TOWING AND RENTAL COVERAGE
This is optional coverage that pays on a reimbursement basis for towing or a rental car in the event of a covered claim. The reimbursement is subject to the limits as stated on the policy.
TRESPASS
An illegal act against another person's rights or property.
UMBRELLA POLICY
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
UMPIRE
A third person appointed to decide an arbitration.
UNACCEPTABLE BUSINESS USE
Any delivery use including pizza, fast food and newspaper is unacceptable. Any vehicle used to carry equipment, deliver supplies or transport people for a fee is unacceptable. Examples of unacceptable business use would be buses, livery, carpenters, electricians, gardeners, plumbers and vehicles in a business name. For more specific questions regarding what is acceptable or unacceptable business use contact your YouZoom Network broker for further assistance.
UNDERWRITE
To insure. More commonly, to scrutinize a risk and decide on its eligibility for insurance.
UNDERWRITER
The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which he/she specializes and in this way chooses risks his/her principals are prepared to underwrite.
UNDERWRITING
The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of risks that do not fit within the guidelines of the company.
UNINSURED MOTORISTS COVERAGE
Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.
UNINSURED MOTORIST COVERAGE (UM)
If a driver or owner of a vehicle does not have insurance and is legally liable for an accident, you can use UM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
UNDERINSURED MOTORIST COVERAGE
If a driver or owner of a vehicle is legally liable for an accident but does not have enough insurance, you can use UIM coverage for injuries, including death, that you, your resident relatives, and occupants of your insured vehicle sustain, up to the limits you select. Certain exclusions may apply. Refer to your policy.
UNINSURED/UNDERINSURED MOTORIST PROPERTY DAMAGE COVERAGE (UMPD)
If driver or owner of a vehicle is legally liable for an accident but does not have insurance or does not have enough insurance, you can use UMPD to cover damage to your insured vehicle, up to the limits you select. In some states, UMPD is available as an alternative to Collision coverage. Certain exclusions may apply. Refer to your policy.
UNINSURED MOTORIST PROPERTY DAMAGE
If you have an accident with an uninsured driver, this coverage will pay for direct loss or damage to your car described under the policy, subject to the limits stated on the policy.
UNINSURED/UNDERINSURED MOTORIST BODILY INJURY COVERAGE
This is a coverage under which your insurance company will pay you for damages you’re legally entitled to receive from the owner or operator of an uninsured or underinsured motor vehicle because of bodily injury in a covered claim.
UNOCCUPIED
Where the premises contain contents but no human beings, such persons being temporarily away from the premises, on vacation for example, the premises are said to be unoccupied. This is distinguishable from Vacant in that in vacancy, the contents have been moved out leaving nothing but the building.
UNPROTECTED
A property located in an area not regularly serviced by a fire department.
UTMOST GOOD FAITH
A phrase in a legal document calling for the highest standards of integrity on the part of the insured and the insurer.
VACANT BUILDING
A building with no occupants or furnishings. See also Unoccupied.
VEHICLE INDENTIFICATION NUMBER (VIN)
The Vehicle Identification Number (VIN) for your vehicle is usually found on the driver's side of your dashboard, the vehicle registration or the title. The VIN is a combination of 17 letters and numbers that can be used to identify the make, model and year of a car.
VICARIOUS LIABILITY
Liability imposed upon a person even though not a party to a particular occurrence, e.g., the owner of a motor vehicle is vicariously responsible for injuries even though he is not driving the car at the time of the occurrence.
VOID
A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.
WAIVER
The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.
WARRANTY
Statement or stipulation in a contract, the breach of which nullifies the contract.
WATER DAMAGE CLAUSE
A Portion of the policy affording coverage for certain specific causes of water damage.
WATER-DAMAGE INSURANCE COVERAGE
Protection provided in most homeowners insurance policies against sudden and accidental water damage, from burst pipes for example. Does not cover damage from problems resulting from a lack of proper maintenance such as dripping air conditioners. Water damage from floods is covered under separate flood insurance policies issued by the federal government.
WRITE
To insure, underwrite, or accept an application for insurance.

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