Glossary of Insurance Terms

A
Act of God:
Natural occurrence without human involvement that could not have been prevented. Example: lightning, tornadoes, hurricane.
Actual Cash Value (ACV): In property insurance, ACV is the depreciated value of property. It is calculated by deducting the amount of physical depreciation from the item’s replacement cost. The depreciation methodology & valuation is subjective.
Additional Living Expense: When an insured loss requires you to live outside your home while repairs are being made, the Insurance company will reimburses the insured (you – policyholder) for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured’s normal expenses prior to the loss. This includes additional living expenses such as moving expenses, hotel, rent, and restaurant costs while repairs are being made to your damaged home.
All Risk Policy: Losses are covered for a wide range of causes except those specifically excluded in the policy.
Appraisal: Similar to arbitration. Appraisal is a separate evaluation between two appraisers (one chosen by insurance company and one chosen by the insured (you)) in which the two sides try to come to an agreement on the differences of covered costs of the claim. If they cannot come to an agreement, a neutral third party umpire will determine the final ruling.
Arson: The intentional setting on fire of one’s own property in an attempt to collect insurance compensation.

B
Boiler & Machinery Insurance:
Fired vessels, steam generators, mechanical and or electrical objects and turbines, are all examples of “objects” that might be listed for coverage under a boiler and machinery policy. Coverage is provided for damage to covered property caused by an accident to an object identified in the policy’s schedule. Coverage includes extra expense, automatic 90-day coverage at new locations, defense against liability claims, and supplementary payments like those provided under public liability policies.
Broad Form Insurance Coverage: Provides a larger list of covered risks (perils) than Basic Form insurance coverage.
Builders Risk Insurance: A variation of property coverage specifically applicable to construction projects. It is commonly written in an amount to cover the value of the structure when completed. The premium charged takes into account that values at risk increase gradually over the term of the policy.
Business Income Coverage: Insurance protecting the income derived from an insured’s business activities following a covered peril. Coverage includes reasonable extra expenses the insured incurs to expedite return to normal business operations.
Business Personal Property: A term relating to the “contents” of a commercial enterprise. It may include furniture, fixtures, machinery and equipment as well as inventory, all other property owned by the insured, and even use interest in building improvements and betterments.
Binder: Temporary or preliminary coverage until a policy can be written or delivered.
Broker: Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.
Broker: Agent Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant’s coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.

C
Cancellation:
Insurance carrier or insured stops coverage prior to the policy’s normal expiration date.
Claim: A request for reimbursement for a loss covered under the policy.
Civil Authority: An insurance policy provision that will typically extend coverage for Business Interruption and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property. The requirements for coverage under this provision are the existence of an order of civil authority which prohibits access to the insured premises, is caused by or results from physical damage to property other than insured property, that damage to property must be due to a peril covered under the policy, and that denial of access must be the proximate cause of loss of business income.
Company Adjuster: An adjuster who is employed and works solely for an insurance company or self-insured entity.
Conditions: The part of the insurance policy that explains the obligations of the insured (you – policyholder). It explains your duties in the event of a loss and how the company will settle.
Co-insurance: The policy provision which states that if the Insured (you – policyholder) has less than a specified amount of coverage (usually 80% of property value), the insurance company will not fully cover a partial loss.
Collapse: A property insurance peril, subject to its own specific agreement in commercial property policies, which otherwise insure on an open perils basis.
Covered Loss: Types of accidents, losses, or situations for which an insurance policy will pay compensation.
Coverage: The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.

D
Debris Removal:
A consequential coverage which pays for the insured’s (you – policyholder) expenses to remove debris of covered property caused by a Covered Cause of loss.
Declarations: Commonly the first page of your policy containing the name of the insured, the address, and the dollar amount of coverage provided, a description of the property, and the premium cost.
Deductible: The amount of the loss you are required to pay out-of-pocket per claim or accident.
Depreciation: The decrease in property value since the time it was built due to age or normal wear and tear.

E
Endorsement:
An attachment to your insurance policy that adds to, removes or changes the original terms. You can negotiate various types of endorsements to tailor a policy to your special needs.
Exclusions: Certain causes and conditions that your insurance policy does not cover.
Exposure: Measure of vulnerability to loss, usually expressed in dollars or units.
Extra Expense: Commercial property coverage to pay for the extra cost of continuing a business after a covered loss. For example, if your building is uninhabitable by fire or any other insured peril, expenses necessary to continue your business operations (such as rent, moving costs, etc.) would be covered. Extra Expense insurance covers such expenditures above your normal monthly expenses.

F
Fire:
Combustion evidenced by a flame or glow. Insurance distinguishes between a “hostile” fire (a fire which was not intended to cause the resulting damage) and “friendly” fire (a fire which is not covered by a property policy because the fire was intentionally started and is burning where it was intended such as a candle on the dining room table or a fire in the fireplace). Property insurance policies cover hostile fires but will not cover friendly fires.
Flood Insurance: Policy underwritten by the federal government to cover damage from rising water.
Fraud: The intentional perversion of the truth in order to mislead someone into parting with something of value.
Fungi: Refers to, but is not limited to, any form or type of mold, yeast, mushroom or mildew whether or not allergenic, pathogenic or toxigenic Any substance, vapor or gas produced by, emitted from or arising out of any fungi or spores or resultant mycotoxins, allergens or pathogens.

G
Guaranteed Replacement Cost Coverage:
Pays for the full cost to replace or rebuild insured property, even if it costs more than your policy limits.

I
Indemnity:
Placing the insured (you – policyholder) back into the same financial position (no better and no worse) than they were in prior to the loss occurring.
Independent Adjuster: A trained and licensed insurance adjuster who works for multiple insurance companies or self-insured entities.
Inflation Guard Coverage: An automatic annual raise in your coverage limits based on the insurance company’s estimate of rising building material and labor prices.
Insurance: A mechanism whereby risk of financial loss is transferred from an individual, company, organization, or other entity to an insurance company.
Insurance policy: The document containing the contract between the insured (you – policyholder) and the insurer (insurance company), which defines the right and duties of the contracting parties.

L
Liability Coverage:
Insurance that covers the injuries to another or damage to another person’s property for which you are liable.
Limit of Insurance: The maximum amount of benefits your insurance policy pays in the event of a loss.
Loss: The dollar value of property damage or physical injuries.
Loss of Use: An extra expense you incur while staying at a temporary location if your home becomes uninhabitable after a covered loss.

M
Midterm Cancellation
: A cancellation that occurs during the policy term and prior to the expiration or renewal date of the policy.
Misrepresentation: An intentional misstatement (lie) made by the insured (you – policyholder) to the insurance company.
Mold: A very large group of microscopic fungi that live on plant, animal or surface matter. Most are filamentous organisms and produce spores that can be air-, water-, or insect-borne. A common trigger for allergies and can be fatal if overexposure occurs. Traditionally, mold damage has been covered where it results from a covered peril, such as a broken pipe, a storm, or fire suppression efforts, but not where it occurs gradually over time due to wear and tear.

N
Named Insured:
The party or parties specifically named as insured in the insurance contract. Others may have claim on the coverage of a policy by way of internal provisions, but any such right is by way of the agreement between the named insured and the insurance company.
Named Perils: Individually itemized, covered, perils stated in your policy.
Non-renewal: The refusal by a company to renew your policy when it expires.

O
Ordinance or Law Coverage

Coverage for Loss to the Undamaged Portion of the Building: Pays for the loss of value of an undamaged portion of the existing building, which must be demolished and/or removed to conform to municipal ordinance, code, etc.
Demolition Cost: Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.
Increased Cost of Construction Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Offer: The amount your insurance adjuster proposes to pay you for your loss.

P
Peril
: An event that causes a loss to your home and property such as fire, windstorm, and theft. Insurance policies have both covered and excluded perils.
Personal Property: The contents of your home such as furniture, appliances, and clothing.
Personal Property Floater: An endorsement that provides additional coverage for itemized or listed furs, jewelry, stamps, coins, antiques, computers, guns, and other items that exceed the normal low limits in your home policy.
Premium: The amount of money paid for your insurance policy.
Proximate Cause: An active, direct, cause of loss that sets in motion an unbroken chain of events which bring about damage, destruction, or injury without the intervention of a new and independent force. For example, fire is the proximate cause of loss for the damage done by water in extinguishing a fire.
Public Adjuster: Public Adjusters are trained and licensed insurance adjusters who work exclusively for the policyholder rather than the insurance company.

R
Replacement Cost:
Amount required (current price) to replace your damaged property with one of like kind and quality without deduction for depreciation
Risk: The chance of loss occurring.

S
Scheduled Articles:
Addition to a homeowner’s policy to provide extra coverage for listed items. Examples: jewelry, furs, stamp and coin collections, bicycles, cameras
Settlement: The dollar amount you agree to accept from the insurance company as payment for your loss.
Sewer Back-up/Water Coverage: Protects you against direct loss or damage caused by water entering your dwelling as a result of accidental escape of water from a sewer, storm drain, drain, sump, septic tank, eaves trough or downspout
Subrogation: A third party (e.g., the insurance company) assumes another’s legal right to collect a debt or damages.

T
Terrorism:
An ideologically motivated, unlawful act or acts including but not limited to the use of violence or force or threat of violence or force committed by or on behalf of any group(s), organization(s) or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public

U
Umbrella:
Liability Insurance protection against losses in excess of the amount covered by other liability policies.
Underwriting: The process by which an insurance company selects and classifies risks according to their degree of insurability.

V
Vacant:
All occupants have moved out with no intention of returning regardless of the presence of furnishings. An insurance company typically considers a property vacant when there have been no occupants for over 60 consecutive days. In the case of a newly constructed house, no occupant has yet taken up residence.