Insurance Glossary

We want you to understand all facets of your insurance policies, which is why we've provided this helpful glossary of common terms. Our agents take the time to educate clients about their options as well as about the exclusions and limitations common to many policies.
We take time to educate you about your options and work closely with you to understand your needs, identify gaps and find the policy that fits you best.


A term that applies to property and signifies both a relinquishing of it and the letting go of all legal rights to it, as well, with the intent to claim a total loss. Abandonment of property to an insurance company is something insureds are expressly prohibited from doing in most property polices.

Abandonment Clause

A property policy provision that stipulates that the insurer need not accept any damaged property that the insured chooses to relinquish.

Absolute Liability

1he performance of an act so dangerous as to be sufficient to trigger liability regardless of the degree of negligence. Triggering explosives is often used as an exan1ple. Sending workers aloft for construction or repair at elevated heights is another. Strict liability is another term that is sometimes used.


An unforeseen, unintended, and unexpected event, which occurs suddenly and at a definite place. See Occurrence.

Accident Year Experience

Measures premiums and losses relating to accidents which occurred during a 12-month period.

Accounts Receivable Insurance

Pays for the cost of reconstructing accounts receivable records that have been damaged or destroyed by a covered peril. Even more importantly, it covers any payments that cannot be collected because records cannot be reconstructed.

Act of God

Acts of nature - the term was once widely used to distinguish between manmade events, such as, fire, collision, and nature's rampages in wind and flood.

Actual Cash Value (ACV)

A method for placing value on property as of the time of its loss or damage. ACV may be determined as replacement cost less depreciation. The market value of an item may be used to help determine actual cash value. Contrast with replacement cost.

Actual Loss Sustained

A term used to distinguish from a valued form.

Additional Insured

One who qualifies as insured under the terms of a policy even though not named as insured. Officers of a corporation may be included as insured s under the terms of a policy written in the name of the corporation.

Additional Living Expense Insurance

This coverage, found in homeowners forms, provides payment for extra expenses made necessary by the insured's inability to reside in the insured dwelling because of a covered loss - for example, restaurant meals and hotel bills. The amount payable is the difference between normal household expenses and the increase.

Additions and Alterations

Coverage that protects any additions, alterations, and improvements a condo owner makes to his unit, for up to 10 percent of your contents limit. This coverage can be increased.


A person who may act either on behalf of the insurance company or the insured in the settling of a claim. Employee adjusters work for an insurer, while independent adjusters represent the insurance company on a fee basis and public adjusters represent the insured on a fee basis.

Admitted Company

An insurance company that is licensed (admitted) to conduct business within a given state.

Advance Premium

Also called deposit premium, an advance premium is a down payment on what will be the final premium, in policies where the final premium is subject to audit.

Advertising Injury

Claim arising out of slander, libel, copyright infringement, or misappropriation of advertising ideas. Coverage is provided as part of Coverage B of the commercial general liability policy.


One who solicits, negotiates, or effects contracts of insurance on behalf of an insurer. His/her right to exercise various functions, his/her authority, and his/her obligations and the obligations of the insurer to the agent are subject to the terms of the agency contract wid1 the insurer, to statutory law, and to common law.

Agent of Record

The agent indicated on and for each insurance policy, binder, or acceptance. The agent on a particular policy or bond.

Aggregate Deductible

A deductible provision in some property insurance contracts where all covered losses during a year are figured together and an insurer pays only when the aggregate deductible amount is exceeded.

Aggregate Limit

The maximum amount an insurer will pay under a policy in any one policy period.

Agreed Amount Clause

An agreement between underwriter and insured whereby, in exchange for the purchase of coverage in an amount specified by the underwriter, the insured is protected from a coinsurance penalty.

Agreed Value Clause

Though rare, some policies cover for a value agreed upon at the time of writing. If the property is lost because of an insured peril, the amount stated in the policy will be paid. Fine arts insured under a personal articles floater or homeowners scheduled personal property endorsement are examples.

All Risks

A property policy expression now out of fashion. It was used to designate contracts that promised coverage against all risks of direct physical loss in contrast to forms that covered for specific, named perils. The word All came to be perceived as open to broader interpretation than insurers intended and it was dropped in favor of the promise to cover risks of physical loss. See Named perils and Open perils.

Alternative Dispute Resolution (ADR)

Methods other than lawsuits that are designed to resolve legal disputes. Examples are arbitration and mediation.


A standard policy provision that proves to be ambiguous may be interpreted in the light most favorable to the insured.

Americans with Disabilities Act (ADA)

Passed by Congress in 1990, this act requires that reasonable accommodation be made in public accommodations, including the workplace, for those with physical or mental disability.

Anniversary Date

The anniversary of the original date of issue of a policy as shown in the declarations.

Annual aggregate deductible

A deductible applied annually to the total amount paid in claims during a policy period. Claims are generally subject to a per-occurrence deductible; the aggregate is the limit beyond which no further deductibles are applied.


The method of dividing a loss between multiple insurers that cover the same loss.


A determination of the value of property for the purposes of determining the proper amount of insurance to be bought or in adjusting a loss.

Appraised value

Value of an object or location as determined by an independent appraiser. This value could be market value, replacement cost value, or utility value.

Approved roof

A roof made of fire resistive materials, e.g., tile or asphalt.

Appurtenant structure

Another structure on the same premises as the principal structure. A detached garage on a dwelling premises is appurtenant to the dwelling. Older homeowners forms refer to the other structures protected under the HO Coverage B as appurtenant structures.

Arbitration clause

The clause in an insurance policy that spells out how disagreements over a claim are settled.


The intentional setting a fire of property.


All funds, property, goods, securities, rights of action, or resources of any kind owned by an insurance company. Statutory accounting, however, excludes non-admitted assets, such as deferred or overdue premiums, that would be considered assets under generally accepted accounting principles (GAAP).


An individual who is given authority to execute legal documents, including bonds; or the manager of a reciprocal exchange, which is an insurance arrangement whereby risk is transferred to other members. The attorney-in-fact need not be a lawyer.

Attractive nuisance

Condition that can attract and injure children. The occupants of land on which such a condition exists are liable for injuries to children. Examples of attractive nuisance include swimming pools, earth moving equipment, and playground equipment.


Some policies (such as workers compensation) are written subject to an audit. Since workers compensation premium is based on the insured's payroll, the insurer is entitled to audit the insured's records at the end of the policy to verify that it has collected an adequate premium for the amount of payroll to which it was exposed.

Automobile liability insurance

Insurance in which the insurer agrees to pay all sums for which the insured is legally obligated because of bodily injury or property damage arising from the ownership, maintenance, or use of an auto.

Automobile medical payments

Insurance applying to the medical, hospital, or funeral expenses of anyone injured while on or in an insured automobile. The coverage is not dependent on liability, being triggered simply by an accident. It may be included in either the Business Auto Policy or the Personal Auto Policy. See also Premises medical payments.

Auto physical damage insurance

Insurance on the vehicle. This coverage usually is broken down into collision and other than collision coverages.

Avoidance of risk

Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure.

Back up of sewers and drains

Condition in which water (possibly plus other materials) enters a premises through a drain or sewer because of blockage or super saturation.


One who is charged with the care of the property of another. For example, a garage is the bailee of a customer's (bailor's) car (the bailment) and a jeweler is a bailee of customers' jewelry while in its possession for repair or appraisal.

Bailee's customers' insurance

Insurance designed to reimburse a bailee's customers for loss without regard to liability.

Bailee's liability insurance

Insurance covering damage negligently caused by a bailee or employee to goods left in their care.

Bankers blanket bond

A bond designed to indemnify for loss of money or securities caused by dishonesty of employees, robbery or theft from the premises, or robbery or theft while the insured property is in transit.

Basic causes of loss

The perils of fire, lightning, and removal of property from premises endangered by those perils as shown in the standard 1943 New York fire policy.

Basic named perils

Covered perils in a property insurance contract: fire, lightning, windstorm, civil commotion, smoke, hail, aircraft, vehicles, explosion, and riot.

Best's rating

A rating given to insurance companies by the A.M. Best Company, independent analysts of the insurance industry. The ratings range from A++ (Superior) down to D (below minimum standards). Also, ratings of E and F are given to companies under state supervision or in liquidation. The ratings reflect A.M. Best's evaluation of an insurance company's financial strength and operating performance relative to the norms of the property/ casualty insurance industry.


A term used to express the difference in the value of property before loss and after restoration. Ifa 20-year roof is damaged by an insured peril and it has to be replaced in its 15th year and the restoration renews the 20-year life expectancy, the owner has obtained a 15-year betterment in the roof. Without replacement cost insurance on the roof, the owner is expected to reimburse the insurance company for the betterment entailed in the restoration. Also see Improvements and betterments.


An insurer's agreement, by way of an agent, to provide nonlife insurance on the spot, pending issuance of the policy contract.

Blanket bond

An employee dishonesty or fidelity bond covering all persons of a group or class, as opposed to bonds naming specific individuals (name schedule) or positions (position schedule).

Blanket coverage

A means of insuring various items of property under one limit of liability.

Blanket insurance

Insurance covering multiple items of property as a group. Covered property may be at one location or several.

Block policy

A block policy provides a form of inland marine insurance. It covers loss to the property of a merchant, wholesaler, or manufacturer including property of others in the insured's care, custody, or control; property on consignment, and property sold but not delivered. A block policy covers loss caused by most perils (including transportation), subject to certain limitations as specified in the policy exclusions. Common block policies are jeweler's block and furrier's block policies.

Bodily injury

A term that refers to physical injury, sickness, disease, or death resulting therefrom. In some jurisdictions bodily injury includes emotional injury.

Bodily injury liability

Legal obligation that flows from the injury or death of another person. This insurance is commonly limited to bodily injury liability derived by way of negligence, however coverage of liability by way of contract (holding another harmless) is also possible.

Boiler & machinery insurance

Fired vessels, steam generators, mechanical and electrical objects, and turbines are all examples of objects that might be listed for coverage under a boiler and machinery policy. Coverage is 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.

Bond, fidelity

A bond that guarantees the principal's honesty.

Bond, surety

The financial assumption of responsibility by one or more persons for fulfilling another's obligations.

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.

Building ordinance or law

This coverage pays for additional construction costs incurred as the result of local building laws. It contains three coverages which may be provided separately or together.


Unlawful removal of property from premises involving visible forcible entry.

Business auto policy (BAP)

A standardized contract for writing liability and property coverage on commercial autos.

Business income coverage

Insurance protecting the income derived from an insured's business activities when curtailed by a covered peril. Coverage includes reasonable extra expense the insured undertakes to expedite return to business operations.

Business income, dependent properties

Covering loss to an insured when the operations of a key supplier, customer, or leader property on which the insured's operations are dependent are shut down by a covered peril. Also referred to as contingent business income.

Business personal property

A term relating to contents of a commercial enterprise. It may include furniture, fixtures, machinery and equipment as well as stock, all other chattels owned by the insured, and even use interest in building improvements and betterments.

Businessowners policy (BOP)

A package of property and liability insurance for small and medium size businesses, the BOP owes its origin to the success of the homeowners policy.

Cancellation; flat, pro rata, or short rate

In a flat cancellation the full premium is returned to the insured. A pro rata cancellation means the insurer has charged for the time the coverage was in force. Short rate cancellation entails a penalty in excess of pro rata for early termination.

Care, custody, or control

An expression common to liability insurance contracts. It refers to an exclusion in the policy eliminating coverage for damage to property of others that is in the insured's care, custody, or control. The insured has a bailee relationship to the property, in other words, making the insured liable for the care of the property beyond damage caused by negligence. A bailees floater is often used to cover the insured's obligation for the care of such property.

Cash-flow underwriting

Name given to an insurer's practice of nonselectively writing business in order to generate greater amounts of cash for investment purposes.

Casualty insurance

The type of insurance concerned with legal liability for losses caused by bodily injury to others or physical damage to property of others.

Causes of loss forms

1he reference is commonly to property insurance contracts and the form in question details those perils to which the coverage will respond. Though any property insurance contract must name the perils it intends to cover, for example, crop hail, earthquake, or perils of transit, the most commonly used general forms are the basic and broad named perils forms and the special form. In contrast to the named perils forms that list specific perils for coverage, the special form contract covers, simply, risk of direct physical loss and relies on exclusions to delimit and define the coverage.

Certificate of insurance

A written description of insurance in effect as of the date and time of the certificate. The certificate does not ordinarily confer any rights on the holder, that is, the issuing insurer does not promise to inform the holder of change in or cancellation of coverage.

Claims-made coverage

A type of public liability insurance that responds only to claims for injury or damage that are brought (to the insurer) during the policy period (or during a designated extended reporting period beyond expiration). This development was in response to long tail claims, such as those related to asbestosis injury, carrying over many years and multiple layers of coverage limits. However, most public liability policies are written on an occurrence basis, covering injury or damage occurring during the policy period even if a claim is brought months or even years later.


A provision or condition affecting the terms of a contract. Coinsurance, cancellation, and subrogation clauses are typical insurance contract clauses.

Clear space clause

A clause requiring that insured property, such as stacks of lumber, be stored at some particular distance from each other or from other property.

Clean-up costs

Generally, those costs associated with the clean-up of pollution.

Coinsurance clause

Coinsurance refers to the bargain between commercial property owners and the insurance industry. This clause in property policies encourages the property owner to gauge coverage needs by possible, not probable, maximum loss. With $1 million at risk but a probable maximum loss of S100,000, for example, the property owner would probably buy S100,000 insurance and bank on avoiding the larger disaster. The bargain offered by the insurance industry is a reduced rate per $100 of coverage if the owner agrees to buy coverage at a specified relation (80% commonly) to value (to possible maximum loss in other words). If the insured accepts the bargain but events prove the amount of insurance is inadequate to the stated coinsurance percentage, the insured becomes coinsurer in the same ratio as the amount of insurance bears to the amount that should have been carried.


A property insurance peril, subject to its own specific agreement in property policies, that otherwise insure on an open perils basis.

Collision damage waiver

When paired with an auto rental agreement, the rental car company agrees to waive the renter's responsibility for any physical damage to the rental car in exchange for an additional payment. Sometimes called a loss damage waiver.

Collision insurance

A type of physical damage insurance available for automobiles. Coverage is triggered when damage is caused by striking against another object.


A secret agreement between persons to defraud another, e.g., an insured driver of an automobile and his passenger may misrepresent the facts of an accident in order to have monies paid to the passenger under the insured's automobile insurance policy.

Combined ratio

The sum of an insurance company's loss ratio and expense ratio; used as an indicator of profitability for insurance companies.

Combined single limit (CSL)

Liability policies commonly offer separate limits that apply to bodily injury claims and to claims for property damage. 50/100/25 is shorthand under such a policy for $50,000 per person/$100,000 per accident for bodily injury claims and S25,000 for property damage. A combined single limits

policy might cover for $100,000 per covered occurrence whether bodily injury or property damage, one person or many.

Commercial blanket bond

A bond that covers the named insured against employee dishonesty. A single coverage amount applies to any one loss, regardless of the number of employees involved.

Commercial general liability (CGL)

The CCL policy is an ISO form widely used to provide commercial enterprises with premises and operations liability coverage, products and completed operations insurance, and personal injury coverage. Premises medical payments coverage is often included as well.

Commercial lines

A distinction marking property and liability coverage written for business or entrepreneurial interests as opposed to personal lines.

Commercial property policy

An alternative title for the commercial building and personal property coverage form.

Common area

The part of a building or premises either owned by or used by all tenants or tenant-owners of the building (e.g., the swimming pool at a condominium).

Comprehensive Loss Underwriting Exchange

Commonly referred to as a CLUE report, this provides accident or loss history of individuals including claim payments and coverages. Used by agents and carriers to determine eligibility and premiums for coverage.

Comprehensive personal liability insurance

Provides individuals and family members with protection from legal liability for most accidents caused by them in their personal lives. Note that any legal liability claims submitted while in the course of business activities are not covered.

Comprehensive physical damage (automobile)

Traditional name for physical damage coverage for losses by fire, theft, vandalism, falling objects, and various other perils. On personal auto policies, this is now called other than collision coverage. On commercial forms, it continues to be called comprehensive coverage.

Computer fraud coverage

Covers loss if money, securities, or other property is stolen or transferred through computer fraud.

Computer insurance

Covers computer equipment and peripherals beyond the normal coverage provided in homeowner's insurance policies, typically between $1,000 and $3,000. Some policies are also designed to cover damage and/or theft of portable equipment, such as laptop computers, and even the costs of data recovery.

Concurrent causation

When two perils contribute concurrently to a property loss, one excluded and the other not, the effect of the exclusion tends to be voided in a policy covering on an open perils basis. A concurrent causation exclusion is found in current forms.


One of the obligations of either the insured or the insurer imposed in the insurance contract.


Type of dwelling where the structure is owned jointly, while spaces within the structure are owned individually. Special property and liability forms cover the interests of the condominium association and of unit owners.

Condominium association coverage

A policy that provides coverage for the building, elements of the building, and liability needs for those who collectively own a piece of property.

Condominium unit owner's form

A policy that provides coverage for the personal property, owned elements of a unit, and liability for the individual unit owner.

Consequential loss

An indirect consequence of direct loss to property. Business income may be lost when a store burns down, or frozen goods may spoil when a windstorm causes an interruption of power. Consequential or indirect loss is not generally insured by policies covering direct damage (i.e., by fire or wind as in these examples), but insurance is readily obtainable separately for most such consequential exposures - business income coverage being among the most common coverage.

Contingent liability

Liability imposed on a business entity (individual, partnership, or corporation) for acts of a third party for which the business entity is responsible.

Contract bonds

A type of bond designed to guarantee the performance of obligations under a contract. These bonds guarantee the obligee that the principal will perform according to the terms of a written contract. Construction contracts constitute most of these bonds. Contract bonds protect a project owner by guaranteeing a contractor's performance and payment for labor and materials. Because the contractor must meet the surety company's pre-qualification standards, construction lenders are also indirectly assured that the project will proceed in accordance with the terms of the contract.

Contractors equipment floater

Coverage designed for the special needs of contractors to insure their machinery and other equipment.

Contractual liability

Liability that does not arise by way of negligence but by assumption under contract. For example, in certain leases, a tenant may assume a landlord's liability to others for unsafe conditions on the premises. Some such assumptions are covered automatically under the Commercial General Liability form.

Covered loss

An accident, including accidental damage by forces of nature, that brings a contract of insurance into play.

Credit score

The number produced by an analysis of an individual's credit history. Studies have shown that credit history provides an indicator of the likelihood of an auto insurance loss. Some companies use credit scores as an insurance underwriting and rating tool.

Crime insurance

A broad category covering loss of property through criminal activity – from employee dishonesty to burglary and robbery, computer fraud, and forgery.

Data processing insurance

Coverage for electronic media, computers, and other electronic data processing equipment.

Debris removal clause

A consequential coverage commonly included in direct loss policies. For example, fire policies provide limited recovery for the insured's cost of removing the debris after a covered fire. Not to be confused with removal.

Declarations page

That part of a property or liability insurance policy that discloses information pertinent to the coverage promised; including names, addresses, limits, locations, term, premium, and forms. The who, what, where, and when of the policy. Often referred to as the dec page.


The part of the loss that is to be borne by the insured.

Defense costs

The portion of the commercial general liability policy that applies whether or not the claim is legitimate and well founded. These costs may be part of the total stated policy limits or may be in addition to the stated policy limits. Auxiliary charges may be included with defense costs.

Demolition insurance

When a building is damaged beyond a certain point, local building codes may direct that the structure be razed. Insurance to cover this exposure (and the lost value of the undamaged but newly razed part) can and clearly should be arranged whenever it exists.

Deposit premium

When the price of insurance is tied to fluctuating values or costs that cannot be known until the end of the policy period, inventory or payroll are two common examples, a deposit or provisional premium or estimated premium may be charged at the outset of a policy with final adjustment to come at the end of the term.


As property ages and becomes worn it often loses value. That loss of value must be taken into account in any adjustment of property insurance that covers loss of actual cash value.

Detached signs

Signs located away from the designated premises. They may or may not be part of the covered property.

Diminution of value

The idea that a vehicle loses value after it has been damaged in an accident and repaired.

Direct damage

Physical damage caused to property by a peril such as fire or lightning.

Direct loss

The immediate consequence of the action of an insured peril. A fire damaged structure is a direct loss by fire. In contrast - See Consequential loss.

Directors and officers liability insurance (D&O)

A form of errors and omissions insurance covering the directors and officers of corporations against suits alleging they committed wrongful acts.


The duty of an applicant and their broker to tell the underwriter every material circumstance before acceptance of risk.

Drive other car (DOC) endorsement

A business auto or garage policy endorsement providing coverage for named individuals while driving nonowned autos in situations unrelated to the business of the insured.

Duty to defend

Part of the insuring agreement of many policies. The insurer has the duty to defend the insured in event of a covered loss.

Dwelling forms

Forms for coverage of dwellings and personal property that are not eligible for homeowners coverage. Tenant occupied rental properties are commonly insured under these forms.


The transaction of business by way of electronic media, such as telephones, fax machines, computers, and video-teleconferencing equipment. This generally is broader than e-commerce although some may view e-business and e-commerce as interchangeable terms.


The buying and selling of goods by way of electronic media, such as telephones, fax machines, computers, and video-teleconferencing equipment.

Earned premium

Portion of a premium for which protection has already been provided by the insurer.

Earth movement

Subject to an exclusion in property policies, this peril includes earthquake, landslide, and mudflow.


An interest in land owned by another that entitles its holder to specific uses.

Effective date

The date shown in the declarations of a policy upon which coverage is to take effect.

Employee benefits plan liability coverage

Protects the insured employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the insured's employee benefits programs.

Employee dishonesty coverage

Insurance protecting employers from loss due to theft by their employees.

Employers liability insurance

A feature of standard workers compensation policies, this coverage applies to liability that may be imposed on an employer outside the provisions of a worker's compensation law.

Employers non-ownership liability

Employers who buy commercial auto coverage, on a basis other than any auto, have this exposure whenever an employee uses his or her own auto on the employer's behalf.

Employment practices liability insurance

Coverage against allegations of illegal or discriminatory hiring and firing practices, sexual harassment of employees, and so on.


An amendment to a policy form.

Enterprise-wide risk management

An effort to categorize, measure, and treat all types of risk that may adversely affect a business. It includes both traditional hazard risks and other business risks; such as risks posed by competitors, by economic developments, by natural conditions the business cannot control, and by general operations.


An acronym standing for the 1974 Employee Retirement Income Security Act, which regulates certain employee benefit plans.

Errors and omissions coverage (E&O)

A type of professional liability insurance protecting the insured against claims alleging bodily injury or property damage caused by the professional or technical incompetence of the insured.


A record of losses.

Experience modification

The raising or lowering of premiums under terms of an experience rating plan.

Experience rating

A method of rating that uses past experience to establish current rates.

Expiration date

The date shown in the declarations page of a policy upon which coverage terminates; usually at 12:01 a.m.


An extended coverage peril and currently a covered peril in nearly every policy of property insurance. The peril remains distinct from steam boiler explosion, which is covered by boiler & machinery insurance.


Degree of hazard threatening a risk because of external or internal physical conditions.

Extended non-owner liability

A personal auto policy endorsement that provides broader liability coverage for specifically named individuals. When attached, it covers nonowned autos furnished for the regular use of an insured, use of vehicles to carry persons or property for a fee, and has broader coverage for business use of vehicles.

Extended period of indemnity

A time for recovery of proved business income loss after physical property is restored and business reopened. The 30-day extension included in many business incomes forms may be extended by endorsement.

Extra expense insurance

Coverage that may be purchased as a supplement to business income insurance, applying to expediting expenses that aid in quickly restoring the insured's operations after a covered loss; or it can be the primary coverage sustaining the extra cost of continuing doing business for those insureds who would find it extremely damaging to fail to meet customer commitments, such as newspapers and dairies.

Fair Credit Reporting Act

Public Law 91-508 requires that an insurer tell an applicant if a consumer report may be requested. The applicant must also be told the scope of the possible investigation. Should the application be declined because of information contained in that report, the applicant must be given the name and address of the reporting agency. The insurer may not reveal the contents of the report. Only the agency that compiled the report may release its contents.

Fair rental value

An amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable.

Faulty workmanship exclusions

An alternative name for the business risk exclusions - namely damage to your work and damage to your product in the commercial general liability coverage form.


Federal Emergency Management Agency. This agency administers the National Flood Insurance Program.

Fiduciary bonds

Bonds which guarantee an honest accounting and faithful performance of duties by administrators, trustees, guardians, executors, and other fiduciaries. Fiduciary bonds, in some cases referred to as probate bonds, are required by statutes, courts, or legal documents for the protection of those on whose behalf a fiduciary acts. They are needed under a variety of circumstances, including the administration of an estate and the management of affairs of a trust or a ward. See Judicial bonds.

Fiduciary liability insurance

This insurance covers claims arising from a breach of the responsibilities or duties imposed on a benefit plan administrator; or a negligent act, error, or omission of the administrator.

Financial responsibility clause

The clause in an auto policy stating that, when the policy is certified as future proof of financial responsibility, the policy will comply with the financial responsibility laws to the extent required.

Financial responsibility law

When applied to automobile operations, this term signifies the minimum statutory limits of an operator's responsibility for bodily injury and property damage caused by negligent operation of the vehicle.


Combustion evidenced by a flame or glow. Insurance distinguishes between a hostile fire (one out of bounds) and friendly fire (such as that contained within the fire box of a stove).

Fire department service charge

A fee that may be imposed by a fire department for responding to a call. Most fire coverage agreements include indemnification provisions for such eventualities.

Fire legal liability

Public liability policies routinely exclude coverage for damage to property in an insured's care, custody, or control. This leaves a big gap in a tenant 's coverage - a gap partially filled by an exception in the commercial general liability policy that restores limited coverage for fire damage to the landlord's building. Perhaps the best benefit of the exception is to call attention to the

exposure so arrangements can be made for broader coverage at appropriate limits. Sometimes referred to as fire damage legal liability.

Fire resistive construction

A building which has exterior walls, floors, and roof constructed of masonry or other fire-resistive materials.

Fire wall

A structure (wall) which is designed to prevent fires from spreading within a building. For example, townhouses should have a fire wall between each unit to prevent the entire row from burning. Regarding computer terminology, a fire wall is hardware or software designed to prevent unauthorized access to data from outside users.

First named insured

An insurance policy may have more than one party named as insured. In such cases, the first named insured attends to policy housekeeping; that is, pays premiums, initiates (or receives notice of) cancellation, or calls for interim changes in the contract. This is spelled out in commercial policies in the common policy conditions.


Generally, something tangible that is fixed or attached, as to a building, so that it becomes an appendage or structural part.

Fleet policy

Written for a risk that has five or more vehicles.


An inland marine form covering movable property wherever located within territorial limits.


A general and temporary condition of partial or complete inundation of dry land caused by the overflow of the natural boundaries of a body of water or the unusual and rapid accumulation of surface water runoff. Some insurance policies that include flood as a covered peril only insure against damage caused by overflow of the natural boundaries of a body of water, however other policies also may insure against surface water losses.

Flood insurance

Flood insurance, like earthquake coverage, is usually only of interest to those relatively few whose property is exposed. Consequently, losses among this small group will be high and premiums can be prohibitive. However, in 1968 the federal government stepped in to help property owners in designated flood plains with the National Flood Insurance Act of 1968. Coverage is not only available, but may even be required to obtain financing for exposed properties.


Any land area susceptible to being inundated by flood waters from any source.

Floorplan insurance

A form of insurance covering merchandise held for sale by a retailer which has been used as collateral for a loan. The lending institution, in effect, is insuring its collateral, the merchandise, "on the floor" of the retailer.

Forgery or alteration coverage

1his type of insurance covers loss sustained through forgery or alteration of outgoing negotiable instruments made or drawn by the insured, drawn on the insured's account(s), or made or drawn by someone acting as the insured's agent. This includes loss caused by any of the following: checks or drafts made or drawn in the insured's name, payable to a fictitious entity; checks or drafts, including payroll checks, executed through forged endorsements; and alteration of the amount of a check or draft.


The central document or documents of an insurance contract. Forms may be altered by endorsement.


The intentional perversion of the truth in order to mislead someone into parting with something of value.

Full reporting clause

Under this clause, an insured is required to report values periodically.1he clause provides for a penalty to the insured if true values are not reported.

Functional replacement cost

The cost to repair or replace damaged property with materials that are functionally the equivalent of the damaged or destroyed property; for example, replacing a solid mahogany banister with a pine banister.

Garage policy

One of the early package policies, it is written for automobile dealers and may include liability insurance for garage operations, automobile operations, physical damage coverage on garage owned autos, bailee's coverage on customer's cars, and auto and premises medical payments coverage.

Garagekeepers liability

A bailee coverage applying to automobiles. Commonly included in garage policies, it may be written to provide coverage for limited perils or for comprehensive physical damage, with or without collision damage coverage. Coverage may be expressed as covering the legal liability of the garagekeeper or amended to cover on a direct basis, as primary insurance or excess.

General partners' liability coverage

A general partner's management and fiduciary responsibilities to a limited partnership closely parallel the director's or officer's to a corporation. Exposure occurs when general partners become the financial managers of a limited partnership. The directors and officers of corporate general partners share this type of exposure.

Glass insurance

Commercial property form that covers plate glass, glass signs, lettering, etc.

Grace period

A period after the premium due date during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

Guaranteed replacement cost

A form of property coverage in which the insurance company agrees to replace damaged property even if the cost to do so exceeds the limit stated in the policy or the underlying rating basis on which the premium is calculated. This extension may be conditional on an approved appraisal and reporting of improvements to the building(s).


Hangarkeepers legal liability

A bailee coverage for those charged with the care of aircraft owned by their customers.

Hard market

A condition of the insurance marketplace in which insurance is difficult to obtain and relatively expensive.


Generally, a condition which increases the possibility of loss.

Hazardous waste

Term generally used to refer to pollutants or contaminants which result from industrial processing and must be disposed.

Hired auto

A nonowned auto that may be borrowed as well as rented or leased by the insured. Personal auto policy insureds are covered automatically for hired autos, but business auto policy insureds may not be.

Hold harmless agreement

A contractual assumption by one party of the liability exposure of another. Lease agreements, for example, commonly require the tenant to hold the landlord harmless for bodily injury or property damage experienced by others on the premises.

Hole-in-one insurance

Coverage designed for amateur golf tournaments in which there is a substantial cash prize for anyone making a hole-in-one.

Homeowners insurance

An early and hugely successful example of packaged property and liability insurance. A mid- twentieth century insurance development was the introduction of the so-called multiline era in which insurers became empowered to write both property and liability forms of insurance; making way for the first packaging of these coverages within a single policy.

Host liquor liability

Part of the commercial general liability policy, covers the incidental serving of alcohol by an insured who is not in the business of serving alcohol.

Hangarkeepers legal liability

A bailee coverage for those charged with the care of aircraft owned by their customers.

Hard market

A condition of the insurance marketplace in which insurance is difficult to obtain and relatively expensive.


Generally, a condition which increases the possibility of loss.

Hazardous waste

Term generally used to refer to pollutants or contaminants which result from industrial processing and must be disposed.

Hired auto

A nonowned auto that may be borrowed as well as rented or leased by the insured. Personal auto policy insureds are covered automatically for hired autos, but business auto policy insureds may not be.

Hold harmless agreement

A contractual assumption by one party of the liability exposure of another. Lease agreements, for example, commonly require the tenant to hold the landlord harmless for bodily injury or property damage experienced by others on the premises.

Hole-in-one insurance

Coverage designed for amateur golf tournaments in which there is a substantial cash prize for anyone making a hole-in-one.

Homeowners insurance

An early and hugely successful example of packaged property and liability insurance. A mid- twentieth century insurance development was the introduction of the so-called multiline era in which insurers became empowered to write both property and liability forms of insurance; making way for the first packaging of these coverages within a single policy.

Host liquor liability

Part of the commercial general liability policy, covers the incidental serving of alcohol by an insured who is not in the business of serving alcohol.

Identity theft

The act of assuming another person's identity in order to gain access to a person's bank accounts or other personal financial information.

Impaired property

A liability exclusion relating to the insured's faulty products or work that results in an impairment to the property to which it is attached, assuming the insured can salvage the situation by replacing the property or redoing the work.

Improvements and betterments

Anything that adds to the value of property. Commonly used to describe a tenant's use interest in fixtures added to the landlord's building. May also refer to permanent changes made by a condominium unit owner to his or her unit, such as the addition of new kitchen cabinets.

Increased cost of construction

A damaged building may have to be upgraded to be repaired under building codes in force at the time of reconstruction. Building owners in such situations need guidance in buying insurance to cover this added exposure.

Increased hazard

Property insurance policies provide that coverage shall be suspended when the hazard in a risk is increased beyond that contemplated when the insurance was written. If a dwelling owner commences manufacturing dynamite in his home, the hazard is extremely increased, and coverage could be denied by the insurer if there were a loss.


A fundamental concept governing insurance; compensation for loss or injury sustained.

Independent adjuster

An individual or member of a firm who contracts with insurers to investigate claims and suggest appropriate settlements. Contrast with Public adjuster.

Independent agent

A retailer of insurance who, by contractual arrangement with a number of insurance companies, sells and services property and liability insurance. The independent agent owns the policy information and expiration dates of his client's coverage and thus controls renewals and their placement.

Indirect damage

Sometimes referred to as indirect loss, this is loss resulting from a peril but not directly caused by that peril. An example is fire damaging a freezer (direct damage), with resultant food spoilage (indirect damage).

Inflation guard endorsement

An endorsement attached to an insurance policy whereby the limits of liability on a piece of property are increased on a regular basis by a certain percentage in order to offset increasing building costs associated with inflation.

Inherent explosion

A natural explosion like dust in a grain elevator.

Inherent vice

A flaw in an item of property that will, in time, reveal itself and show the property as damaged. Property insurance does not normally cover such damage.

Inland marine insurance

Property insurance signaling broad coverage of properties exposed to the transportation peril and those subject to being used or kept at a location other than the insured's customary premises. Eligible property is identified in the Nationwide Definition of Marine Insurance.

Innkeepers legal liability

A bailee coverage purchased by innkeepers to cover the property of their guests.

Insurable interest

The potential for financial loss associated with damage or destruction of property.

Insurable risk

The exposure to significant, measurable accidental loss from identifiable perils. The exposure, while not catastrophic, must be shared by a sufficient number of potential insureds so that the cost of loss for one can be measured and affordably shared throughout the market.


A mechanism whereby risk of financial loss is transferred from an individual, company, organization, or other entity to an insurance company.

Insurance contract

A legal document defining circumstances under which the insurer will pay, and the amount to be paid. Also see Insurance policy.

Insurance policy

The document containing the contract between the insured and the insurer that defines the rights and duties of the contracting parties.

Insurance Services Office (ISO)

An organization providing statistical information, actuarial analyses, policy language, and related services for the insurance industry.

Insurance to value

The concept of purchasing sufficient insurance coverage so as to closely approximate the value of the property being insured.


The party or parties whose interests are covered in a nonlife insurance contract. The less common term assured is sometimes used synonymously.

Insuring agreement

In an insurance contract, the insurer's promise to pay.

Internet liability insurance

Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet; including copyright infringement, defamation, and violation of privacy.

Jewelers block insurance

A policy especially designed for jewelers, it offers a combination of coverages protecting against risks of physical loss to property at the jeweler's premises, property in transit, or customers' property in the insured's care.

Jones Act

The federal act through which maritime workers are provided workers compensation coverage (which ordinarily responds to the mandates of particular states).

Key employee insurance

Life insurance written on the life of an organization's officers or other key employees, the loss of whom would cause the organization financial hardship.

Kidnap-ransom insurance

A specialty coverage offered in the surplus and excess lines markets that responds to ransom demands for recovery of kidnap victims.


Termination of a policy because of failure to pay the premium. If other coverage is not obtained to immediately take effect, there is a gap in coverage during which there is no insurance for any losses. In automobile insurance, this may result in the insured being penalized by the Department of Motor Vehicles for having no insurance coverage, even if the lapse is for only one day.


The unlawful taking of personal property of another.

Latent defect

A hidden flaw that will, in time, cause property damage that is uninsurable. Such damage is uninsurable because the clement of chance is no longer present.

Leased worker

A worker leased from another organization on a long-term basis.

Leasehold interest insurance

The insurable interest is that of a tenant who has some years remaining under a favorable lease that is subject to termination upon significant damage to the leased property.

Legal liability

Liability imposed by law, including liability based on negligence, strict liability, or contractual liability.


The person to whom a lease is granted, commonly called the tenant.


The person granting a lease, also known as the landlord.


Written defamation of another's reputation.

Liberalization clause

A feature of property policies that promises that any future change in the company's form that would broaden coverage with no change in premium will automatically apply under the policy currently in force.


A charge upon real or personal property as security for some debt or duty. Also, the security interest created by a mortgage or automobile loan. The conditions of an insurance policy require the disclosure to the insurer of any existing lien on the insured property.

Like kind and quality

Refers to replacement of damaged, destroyed, or lost property with used property of similar type and condition.

Liquor liability insurance

Liability coverage for owners and operators of establishments selling or serving alcoholic beverages.

Livery use

An exclusion in automobile liability policies applying to the use of autos to carry persons for hire as in a taxi service. A share-the-ride car pool is not livery use.

Loading and unloading exclusion

A feature of commercial general liability (CGL) policies intended to separate that coverage from the automobile exposure. The CGL coverage ends at the point where an item is picked up for loading onto an auto and resumes at the point where the item is deposited upon unloading.

Long tail

Refers to liability under policies written on an occurrence basis. Claims stemming from injury or damage occurring years earlier can be presented for coverage long after the policy has expired. Contrast with Claims-made.

Longshore and Harbor Yorker's Act

A federal law that specifies compensation amounts for injured longshore and harbor workers. Formerly referred to as the Longshoremen's and Harbor Workers Act.


An unintentional decline or disappearance in value arising from an event.

Loss avoidance

A risk management technique whereby a situation or activity that may result in a loss for a firm is avoided or abandoned.

Loss control

Actions to reduce the frequency or severity of losses. Installing locks, burglar or fire alarms, and sprinkler systems are loss control techniques.

Loss experience

What the loss history has been on a particular line or book of business.

Loss exposure

A set of circumstances presenting the possibility of loss, whether or not the loss actually occurs.

Loss frequency

How often a loss occurs over a given space of time.

Loss history

The historical record of losses for a specific entity or group of entities.

Loss limit

Commonly used in financial institution bonds, a loss limit is the aggregate amount that will be paid out under the coverage during the policy term. Loss limits also may be used when insuring large property risks where the exposures are spread out geographically. In this type of situation, it is unlikely that all property would be damaged by a single occurrence. Therefore, the amount of insurance may be set at a loss limit per each covered occurrence.

Loss payable clause

A property policy provision that, at the request of the named insured, stipulates that claims tied to losses of certain property will be paid to both the named insured and the party named in the subject clause.

Loss prevention

Refers to engineering or inspection activities carried out to prevent losses in the workplace.

Loss ratio

The ratio of incurred losses, including loss adjustment expenses, to earned premiums.

Loss runs

A company produced statement of what losses have been filed for a particular insurance policy during a particular time period. Such information may or may not include information on reserves and loss adjustment costs. Typically, provision of such information is mandated by state law.

Lost policy release

A means whereby an insured may cancel a policy by signing a statement to the effect that, since his or her policy has been lost, he cannot return it to the insurer to effect cancellation, but still wishes to cancel the policy.


This is the Endorsement for Motor Carrier Policies of lnsurance for Public Liability under Sections 29 and 30 of the Motor Carrier Act of 1980. The endorsement assures that the trucker carries insurance to comply with the financial responsibility requirements of the act.

Manufacturers selling price clause

Clause stating that finished goods are valued for insurance purposes at their selling price rather than their cost of manufacture.

Marine insurance

Insurance primarily concerned with transportation exposures and property that is commonly moved around from place to place. In the United States, the field is divided between inland marine and ocean marine.

Maritime coverage

Crew members of vessels are subject to admiralty law and may sue their employers for work- related injuries because state workers compensation laws do not apply to them. Therefore, special coverage must be purchased for this exposure.

Market value

The price at which insured property could have been sold just prior to its loss or damage. Along with cost new minus use deprecation, market value is but another gauge used to determine the loss settlement to which an insured is entitled. The insured may choose the gauge that produces the most favorable outcome.

Market value appraisal

An appraisal to determine the market value of a building and related personal property.

Medical malpractice

Type of insurance protecting physicians, surgeons, nurses, and other medical practitioners against claims alleging failure to perform.

Medical payments insurance

A coverage found in auto and liability policies that pays medical expenses to injured persons without regard to liability.

Messenger robbery

Taking money or property from an employee away from the premises.

Mine subsidence coverage

An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.

Mobile equipment

Included for coverage under the commercial general liability form, this term relates to land vehicles used in ways that take them out of an explicit automobile liability exposure (e.g., vehicles used only on the insured premises, to carry certain permanently attached equipment, that are not required to be registered, or are designed solely for off-road use).

Money and securities (broad form) rider

A broad form of policy protecting against loss of money or securities. There is no coverage for losses caused by, among other things, employee infidelity.

Monoline policy

An insurance policy covering one subject of insurance, as opposed to a combination or multiline policy.

Moral hazard

As physical hazard relates to susceptibility to fire or wind, the term moral hazard relates to susceptibility to loss through moral lapse of the owner (e.g., burn the house down and collect from the insurance company before losing it in a foreclosure to the finance company).

Morale hazard

Addresses the issue of an apathetic insured (e.g., it's insured, let it burn).

Mortgage holders clause

A standard property policy provision that creates elements of a separate contract between a mortgage company and an insurance company. Any loss to building or structures will be paid to the mortgage company and insured jointly and any act of the insured voiding coverage will not affect the mortgage holder without it first being given an opportunity to comply with the insurer's needs.

Motor truck cargo policy

Two forms of inland marine coverage are associated with this title - one for carriers and one for owners. As a carrier, the insured is protected for legal liability relating to property of others in the course of transport. As an owner, the insured is protected for in-transit damage to its own property.

Motor vehicle record (MVR)

An official record of a driver's accidents and traffic violations kept by the licensing state(s). Often used to determine eligibility and/or premiums for auto insurance.

Mysterious disappearance

A named peril in some forms. Either theft or unexplained disappearance of covered property from a known location may activate coverage.

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 nonowner policy

Issued to someone who does not own an automobile but who drives borrowed or rented autos.

Named perils

A formal and specific listing of perils covered in a policy providing property insurance. A policy covering for damage by fire is said to cover for the named peril of fire.

National Flood Insurance Program (NFIP)

A federal program through which persons with property located in predefined flood plains can obtain flood coverage. See Flood insurance.


Action or failure to act that is outside the realm of what would be considered appropriate by ordinary, reasonably prudent persons.

Newly constructed or acquired property

An extension of coverage within a multiperil policy to new property purchased or added by the Named Insured. Normally such an extension has a value limit and a time period during which the Named Insured is expected to report the additional property and pay the appropriate premium.

No benefit to bailee

A clause in inland marine forms that prevents a person in the possession of property of others from benefiting from any insurance the owner has on the property.

No-fault auto insurance

A few states have laws that partially exempt drivers from legal liability for auto accidents. In these no fault states, car owners buy insurance to protect themselves and their passengers from the economic and medical effects of auto accidents in addition to liability insurance at whatever limit the statute decrees. Professors Robert Keeton and Jeffrey O'Connell gave the no fault notion impetus with the 1967 publication of their study "After Cars Crash."

Nonowned auto

This term signifies an auto that is neither owned, hired, nor borrowed by the insured under a commercial auto policy. Employees' cars used in company business are commonly classified this way.

Nonrenewal clause

Provision in a policy that states the circumstance s under which an insurer may elect not to renew someone's policy.

Notice of loss

Notice the insured provides to the insurer that a loss has occurred.


A term used in surety bonds to refer to the individual or firm that is to benefit from the bond's protection. A performance bond, for example, provides the obligee property owner with recourse if the bonded contractor, the principal, fails to perform.


A term used in surety bonds to refer to the individual or firm bound by an obligation. Also known as the principal.


In general, a condition affecting the desirability of property policies.


In general, an event that triggers coverage under any policy. Specifically, an event that triggers coverage under an occurrence-based liability policy. Such a policy covers injury or damage that occurs during the policy period even if claim is brought months, or even years, after the policy has expired. See Claims-made for the alternate arrangement. Also see Accident.

Off premises cover

Commercial property policies commonly establish a small coverage limit that applies to property temporarily away from the insured's place of business.

Open perils

Property coverage that applies to risks of loss on a general basis, in contrast with policies that cover for specifically identified perils. See Named perils. The old term for open perils was all risks.

Ordinance or law coverage

This insurance responds to property loss or damage necessitating repair, demolition, or rebuilding in accordance with current building codes.

Ordinary payroll

Payroll allotted to employees whose services could be curtailed in event of a long term shut- down of a business without a harmful effect on reopening. This figure is important in calculating business income insurance exposures.

Other than collision insurance (automobile)

Owners and contractors protective (OCP) liability coverage form - Provides coverage for the liability of an owner of land on which a building is being constructed for the acts of the contractor handling the construction. See Comprehensive physical damage (automobile).

Package policy

Any combination of insuring agreements that combines property and casualty coverages. Homeowners, businessowners, and garage policies are examples.

Paid losses

The losses that have been paid for a claim.

Pair and set clause

Clause that stipulates that partial loss to a pair or set of items will be valued in terms of the lost item, not on the basis of reduced value of the pair or set.

Partial loss

A property loss that is less than a total loss. See Constructive total loss.

Payroll audit

An examination of the insured's payroll records by a representative of the insurer to determine the premium due on a policy for which payroll is the basis.

Peak season endorsement

Instead of buying insurance amounts reflecting values at the height of inventory, some enterprises are able to forecast times when values will be at their peak and use this endorsement to increase the amount of insurance during that specific interval.

Performance bond

A bond that guarantees the property owner (the obligee) that the contractor with the winning bid on a job will perform as promised and on time.


A potential cause of loss.

Period of restoration

The period of time following a loss that is necessary to restore a business or organization to a pre- loss condition.

Personal articles floater

Before the advent of packaged forms and broad coverages, households commonly had fire insurance on dwelling and personal property with the possible addition of extended coverage. The personal articles floater is an inland marine form that was used by the affluent for scheduling open perils coverage for various articles and classes of valuable personal property. A homeowners endorsement accomplishes the same thing today and the personal articles floater is no longer widely written.

Personal auto policy

The form currently promulgated by Insurance Services Office (ISO) for coverage of personal auto liability and physical damage exposures.

Personal effects

The property of an individual covered by the policy in question. Normally refers to items such as clothing, furniture, and jewelry.

Personal injury

Distinguished from bodily injury, this term relates to injury inflicted by way of false arrest, invasion of privacy, malicious prosecution, and so on. It is written as Coverage B of the commercial general liability forms and as homeowners Coverage E.

Personal injury protection (PIP)

The section of an auto policy in a no-fault state that responds to the injuries of the insured, such as physical injury or loss of income of the insured regardless of fault.

Personal liability insurance

Insurance for individuals or members of a household offering protection against claims by third parties (outsiders) alleging bodily injury or property damage due to negligence. See also Premises medical payments.

Personal property

Term used in insurance to distinguish chattels from real property.

Personal property floater

A broad policy covering all personal property worldwide, including insured's domicile.

Physical damage

Damage to, or loss of the auto resulting from collision, fire, theft, or other perils.

Physical hazard

A hazard that arises from the material, structural, or operational features of the risk itself - apart from the persons owning or managing it.

Policy year

Unique to the insurance business, this is a means of cost accumulation in which the aggregate transactions of all policies becoming effective in a given year determine the financial performance of those policies.

Pollutant cleanup and removal

An aggregate first party coverage that applies to the insured's expense in extracting pollutants from land or water at the insured's location if the release of the pollutants is caused by, or results from a covered loss.

Pollution exclusion

Standard general liability policies include an exclusion for loss arising out of pollution. For certain exposures this exclusion may be modified, e.g., sudden and accidental pollution arising from a fire.

Pollution liability insurance

Coverage for bodily injury or property damage caused by a pollution incident. Insurance Services Office has two forms, one limited to on-site cleanup of pollution spills.


Generally, a piece of land with a building or buildings upon it.

Premises and operations liability

Once known as owners, landlords, and tenants legal liability, or as manufacturers and contractors liability, depending on the business's activity, the term refers to the liability exposure of business entities to third parties (customers, guests, and passersby) who may become injured or have property damaged through the negligent acts of the business persons, their agents, or employees. Coverage of this exposure is by way of the commercial general liability policy. Contrast with Products and completed operations liability.

Premises and operations medical payments

Bodily injury, rather than liability, is the trigger for this coverage. Sometimes referred to as customer good will insurance, it is a relatively inexpensive addition to the commercial general liability policy and an automatic feature of personal liability protection. Since it responds to injury of customers or guests without regard to fault, it is sometimes effective in heading off a potentially much more serious liability claim against the owner or tenant of the business premises or private residence.


The amount of money the insured pays the insurer to purchase insurance.

Premium auditor

A person who examines a liability insurance policyholder's insurance records {e.g. sales or payroll) at the end of the policy term to determine if the basis for the premium charge has either increased or decreased.

Primary insurance

The first policy or coverage to apply. Contrast with Excess insurance.

Private passenger automobile

A four wheeled motor vehicle, subject to state registration laws, designed to carry passengers (such as a car, station wagon, SUV, or van) on public roads.

Products liability

The liability for bodily injury or property damage incurred by a merchant or manufacturer as a consequence of some defect in the product sold or manufactured, or the liability incurred by a contractor after he has completed a job as a result of improperly performed work. The latter described part of products liability is called completed operations.

Products and completed operations liability

The liability exposure of the manufacturer whose malfunctioning products may cause injury or property damage or of the contractor whose failed structures or projects may do the same. Coverage of the exposure is a feature of the commercial general liability policy. 'The insurance does not in any way constitute a guarantee of either the insured's product or work. Contrast with Premises and operations liability.

Professional liability

A form of errors and omissions insurance, (sometimes called malpractice coverage for errors alleged against those in the healing and legal professions). Arbitrarily it seems, errors and omissions is the term applied most often to insurance covering liability for mistakes in matters affecting property, for example, coverage for insurance agents E&O, architects E&O - while professional liability is used in reference to coverages such as druggists professional liability, physicians and surgeons professional liability, and lawyers professional liability.

Proof of loss

Following a loss, a formal statement given by an insured to the insurer that includes details of the loss, such as the original cost of damaged or destroyed property.

Property damage coverage

An insurance policy which pays for damage caused to the property of others, including cars, as a result of a motor vehicle accident. Property damage coverage is often mandatory.

Protection class

The grading of fire protection, determined by the Grading Schedule of Cities and Towns, for a given area. This designation is used for all fire rating except for dwellings, in which case the Dwelling Class is used.

Punitive damages

An award for damages above and beyond the requirements for compensating third parties for injury or damage. As the word implies, the award is meant to punish the offender. Most states and territories permit punitive damages awards to be covered by liability insurance.

Currently no glossary terms available.

Real property

Land, buildings, and other structures (such as a swimming pool or tool shed).


The extension of the term of coverage of an expired policy, commonly by replacement with another policy effective on the date of expiration of the previous policy.

Rent insurance

A form of business income insurance for a landlord. It protects building owners against loss of income when the building cannot be rented because of damage from any of the insured perils. It provides income while an insured's building is untenantable.

Rental value insurance

Refers to protection of either a landlord's rental income or an owner-occupant's economic stake in use of the subject structure. Either interested party can obtain coverage by way of an Insurance Services Office business income form.

Renter 's insurance

Term for insurance for the nonowner occupant of a dwelling or apartment.

Replacement cost

The cost of replacing property without deduction for depreciation. See Actual cash value.

Replacement cost appraisal

An appraisal that determines the amount required to replace an existing structure and related personal property.

Replacement cost insurance

Covers property (both building and contents) on the basis of full replacement cost without deduction for depreciation on any loss sustained - subject to the terms of the co-insurance clause.

Reporting form

A device for insuring values subject to extensive fluctuation that keeps the premium in line with the actual exposure. A maximum limit is set at policy inception and the insured is charged a deposit premium. Actual values are then reported, usually on a monthly basis, and earned premium is figured on the basis of those reports and laid off against the deposit premium.

Residence premises

In homeowners insurance - the dwelling, other structures and grounds, or that part of any other building where the named insured lives.

Retroactive date

The date that defines the extent of coverage in time under claims-made liability policies. Claims resulting from occurrences prior to the policy's stated retroactive date are excluded.


The process by which the company reevaluates policyholders and, as necessary, imposes surcharges, deductibles, or nonrenewal in cases where the policyholder's claims history, or other experience, presents a consistent pattern that creates an undue liability risk.


Another term for an endorsement attached to a policy that modifies the coverage.


One of the extended coverage perils, related to, but broader than, civil commotion.


Uncertainty concerning loss. Sometimes also used to refer to a piece of business or a submission to an insurer.

Risk management

The process of handling pure risk by way of reduction, elimination, or transfer of risk - with the latter commonly achieved through insurance.

Risk Manager

The individual in an organization responsible for evaluation of the organization's exposures and controlling those exposures through such means as avoidance or transference, as to an insurance company.


The felonious taking, either by force or by fear of force, of the personal property of another - commonly known as a hold-up.


When an insurer makes a payment for lost or damaged property, the insurer is entitled to the salvage of that property.


List of items on a policy declaration - sometimes also showing descriptions and values.

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 that is present only during certain parts of the year. For example, seasonal dwellings such as cottages used for vacations.


An insurance-like strategy for handling one's own exposures to loss supported by the financial wherewithal to meet expected losses. Not to be confused with a decision to forego insurance.

Self-insured retention (SIR)

That portion of pure risk an insured undertakes to handle on his or her own. A deductible is a form of self-insured retention.

Selling price clause

Applicable to the value of goods which have been damaged or destroyed by an insured peril. This clause insures the profit that would have been earned if the goods had been sold. It sets the insurable value of the property that has been sold, but not delivered, at the amount at which it was sold, less any charges not incurred.

Sewer back-up coverage

An optional part of homeowners insurance that covers damage done by sewer back-up.

Short tail

Additional coverage that may be purchased under a claims-made policy that responds to losses that may have occurred during a policy period but are not reported until after the end of the policy period. Usually available for no longer than a year.

Sinkhole peril

Risk of loss by collapse of a sinkhole.

Sistership exclusion

An exclusion in products insurance that eliminates coverage for the withdrawal or recall of products.


The oral utterance or spreading of falsehood harmful to another's reputation. Libel is written; slander is spoken.

Smoke damage

An extended coverage peril. See Extended coverage peril.

Soft costs and rents

Related to builders risk insurance, these are the necessary expenses that are incurred because a building project is delayed as the result of a covered property loss. Included are expenses such as increases in architectural fees, loss of rents because the project completion date is later than planned, or increased interest expense.

Soft market

A term given to a condition in which insurance is relatively inexpensive and easy to obtain.

Special form

In contrast to the named perils forms in property insurance, those forms that list specific perils for coverage, the special form contract covers, simply, risk of direct physical loss, relying on exclusions to limit and define the protection intended. See Open perils.

Split limits

As in auto insurance, where rather than one liability amount applying on a per-accident basis, separate amounts apply to bodily injury and property damage liability.

Sprinklered risk

Property protected against fire by a system of overhead pipes with regularly spaced heads designed to melt at the heat of a fire, thus releasing water for extinguishment.

Stacking of limits

The application of the limits of one or more insurance policies to a claim or loss.

Stated amount

Amends the valuation clause on a policy to include an amount that is stated as the value of the item(s) being insured. Usually, these policies pay the lesser of the actual cash value of the damaged property, the cost of repairing or replacing the property, or the stated amount.

Statement of values

The information required when a single rate is to cover more than one item or building. To determine a correct average, the rating bureau requires the policyholder to give the value of each separate risk and its contents.


Merchandise held in storage or for sale, raw materials, and in-process or finished goods - including supplies used in their packing or shipping.

Stopgap endorsement

Provides employer liability coverage for work-related injury arising out of incidental operations or exposure in the states that have monopolistic state funds.

Strict liability

Liability ascribed to a manufacturer or seller of a defective or dangerous product regardless of any fault or negligence.


The right of one party who has paid for the loss of a second party to obtain recompense from the third party who is responsible for the loss. For example, an insurance company becomes subrogated to the rights of its insured to the extent of the insurer's payment for collision damage caused by the negligence of the other driver.


A form of earth movement - excluded in most property policies.

Supplemental extended reporting period

An optional reporting period that allows coverage for liability claims made after the policy period.

Surety bond

A three-party agreement guaranteeing that a principal will carry out the contractual obligations the principal has agreed to perform or, alternatively, to compensate the other parties to the contract for losses resulting from the principal's failure to perform .Under many surety bonds, the principal is a contractor.

Surface water

Commonly known as water on the surface of the ground usually created by rain or snow that is of a casual or vagrant character, following no definite course, and having no substantial or permanent existence. Some insurance policies may include surface water as a covered peril but exclude flood when defined as the overflowing of water from its natural boundaries, such as a lake or river.

Tail coverage

Coverage for claims made after a claims-made liability policy has terminated; the extended reporting or discovery period. See Nose coverage.

Temporary worker

An employee hired on a short term, often seasonal, basis.

Tenant's policy

A package policy specially designed to meet the normal insurance requirements of a private tenant covering personal belongings and liabilities.

Terrorism Risk Insurance Act (and extension) (TRIA)

A federal law that sets up a temporary program to allow the insurance industry and federal government to share losses according to a specified formula in the event of a major terrorist attack.

Testing exclusion

In boiler and machinery insurance, a provision that excludes coverage for any object while it is being tested.


Any act of stealing. Theft includes larceny, burglary, and robbery.

Third party

An outsider; a business or personal invitee or a party with absolutely no connection to an insured who may become a claimant under a form of public liability coverage because of injury or property damage alleged to have been caused by the negligence of the insured.

Time element coverage

Insurance in which the element of time has heavy bearing on the extent of loss. Business income insurance covers loss of income for the unknown duration of the insured's business interruption.

Title insurance

Insurance that indemnifies the owner of real estate in the event that someone challenges his or her ownership of property, due to the discovery of faults in the title.


A wrong for which a civil (as opposed to criminal) action can be brought. Many tort claims arise from negligence.

Total loss

A loss of sufficient size so that it can be said there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay.

Transfer of risk

A basic underlying principle of insurance, whereby the risk of financial loss is transferred from one party to another.

Transit coverage

Coverage of the insured's property while in transit over land from one location to another. Property insurance policies typically provide coverage only at locations identified in the policy.

Trip transit

Covers goods in transit in a specified way, such as rail or truck.


The practice of inducing by misrepresentation, or inaccurate or incomplete comparison, a policyholder in one company to lapse, forfeit, or surrender his insurance for the purpose of taking out a policy in another company.

Umbrella liability insurance

A liability contract with high limits covering over top of primary liability coverages and, subject to a self-insured retention (deductible), covering exposures otherwise uninsured.

Underground storage tank (UST)

Tanks sunk in the ground that are used to store or dispose of gasoline or other fuels, hazardous chemicals, or other pollutants or contaminants.

Underinsured motorists coverage

Coverage for the insured and passengers whenever the at-fault driver in an accident has auto liability insurance with lesser limits than the insured's. This coverage lies atop uninsured motorists coverage, or atop the at-fault driver's low limit automobile liability insurance, and provides the insured and passengers with protection equal (usually) to the insured's own automobile liability cover.

Underlying insurance policy

The policy providing initial coverage for a claim until its limit of liability is reached and an umbrella or excess policy's coverage is triggered.

Underlying limits

The limits of liability of the policy(ies) underlying an umbrella or excess policy.


One who researches and then accepts, rejects, or limits prospective risks for an insurance company.

Unearned premium

That portion of an insurance premium that would have to be returned to the insured if the policy were canceled.

Uninsurable risk

An uninsurable risk is one that is literally uninsurable because loss is certain rather than possible.

Uninsured motorists' coverage

Coverage for the insured and passengers whenever the at-fault driver in an accident has no auto liability insurance. Coverage is usually to the extent of limits required by state auto financial responsibility laws.

Unit owners' excess coverage

This type of insurance expands a condo unit owner's insurance coverage to include damage or loss to alterations, fixtures, and improvements within individual units owned by the unit owner, caused by the insured perils. This includes damage to air conditioners, clothes washers, clothes dryers, cooking ovens, cooking ranges, dishwashers, floor coverings, counter tops, kitchen cabinets, refrigerators, and freezers. This coverage applies only as excess insurance over any other valid and collectible insurance that would apply in the absence of this policy.


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.


A property located in an area not regularly serviced by a fire department.

Vacant property

Once defined as devoid of occupants or contents, a stricter definition is being applied as more and more communities find older buildings of three and four stories are only one quarter occupied. Property policies impose limitations on coverage of vacant buildings, so the (changing) definition of vacant property is quite important.

Valuable papers coverage

Provides all risk coverage on valuable papers, such as written, printed, or otherwise inscribed documents and records - including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts. It covers the cost of research to reconstruct damaged records, as well as the cost of new paper and transcription.


To estimate the value of a piece of property usually by considering its replacement cost or its actual cash value. Factored into the estimate is any depreciation or wear-and-tear.

Value reporting form

Commercial form designed for businesses that have fluctuating merchandise values during the year. As values are reported (monthly, quarterly, or annually), the amount of insurance is adjust- ed. Reporting forms help eliminate problems of over-insurance and under-insurance, as well as the need to continually endorse a policy.

Vandalism and malicious mischief

Once treated as a separate peril to be added to a property policy or not, current property forms routinely include the protection.


The vehicle identification number (VIN) on a vehicle. This number is usually found on the dashboard of the vehicle on the driver's side and is usually listed on the vehicle registration and title. The VIN is a combination of letters and numbers seventeen characters in length that can be used to identify the make, model, and year of a car.

Waiver of subrogation

An insurer has the right of subrogation; however, it may waive that right through this method.

War risk

Special coverage on cargo in overseas ships against the risk of being confiscated by a government in wartime. It is excluded from standard ocean marine insurance and can be purchased separately. It often excludes cargo awaiting shipment on a wharf or on ships after fifteen days of arrival in port.

Warehouse to warehouse

Coverage from a shipment's point of origin to its destination, even if these points are inland.

Watchman warranty clause

A provision often found in a burglary or fire policy providing for a reduced premium if there is a watchman on duty.

Wear-and-tear exclusion

A common heading for an all risks exclusion relating to a group of events that do not represent risk at all. Property will become worn out and torn; it will rust, settle, become rotted, infested, marred, or scratched. It is easy to distinguish between the marring that occurs over time (excluded) and marring that occurs when a concrete block is dropped onto a fine wooden table.

Workers compensation insurance

Coverage that conforms to the workers compensation laws of the states in which it written. See also Employers liability insurance.

Workers compensation self-insurers bond

Workers compensation laws, at the state and federal level, require employers to compensate employees injured on the job. An employer may comply with these laws by purchasing insurance or self-insuring by posting a workers compensation bond to guarantee payment of benefits to employees. This is a hazardous class of commercial surety bond because of its long-tail exposure and potential cumulative liability.

Wrap up

A liability coverage specialty focused on contracting risks, while attempting to manage in a single contract the broad interplay of exposures and interests among owners, general contractors, and subcontractors.

Wrongful acts

This is the basic covered injury or damage in a directors and officers policy. Such acts include unintentional negligent acts, omissions or breaches of duty, or errors relating to the operation of the community association. What is a wrongful act varies from policy to policy. Some D&O policies add advertising injury and personal injury to wrongful act coverage.


Short for explosion, collapse, and underground, this acronym is used to denote that certain construction projects carry this hazard.