Insurance Glossary A-B

Below is an Insurance Glossary of terms and definitions related to various coverages

Insurance Policy...Most insurance policies contain five parts: Declarations, Insuring Agreement, Conditions, Exclusions, and Definitions.

Declarations...The Declarations, which are almost always on the first page of the policy, contain such information as the name of the insured, the address, the amount of coverage provided, a description of the property, and the cost of the policy.

Insuring Agreement...The Insuring Agreement, is the heart of the insurance policy, stating in general what is to be covered, the losses for which the insured will be indemnified. This section also describes the type of property covered and the perils against which it is insured.

Conditions...The conditions state the ground rules for the policy. They describe the responsibilities and the obligations of both the insurance company and the insured.

Exclusions...The Exclusions describe the losses for which the insured is not covered. If an excluded loss occurs, the insured will not be indemnified.

Definitions...FInally, the Definitions section clarifies the meanings of certain terms used in the policy.

A

Abandonment Condition... a condition often contained in Property insurance policies that states that an insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value.

Absolute Liability... type of liability imposed by law on those participating in certain activities that are considered especially hazardous. A person involved in such operations may be held liable for the damage of another, even though the individual was not negligent.

Accident... a loss that occurs at a specific time and place.

Accounts Receivable Insurance... Filed Commercial Inland Marine form that insures against loss the insured suffers because of an inability to collect from customers when accounts receivable records are damaged or destroyed.

Actual Cash Value... the cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine the amount of reimbursement for a loss.

Additional Insured... an individual or company, in addition to the insured, who is listed in the Declarations. An example is a mortgage company that has an insurable interest in the property insured.

Adverse Selection... the tendency of insureds with a greater than average chance of loss to purchase insurance.

Agent... an individual or organization that legally represents another, a state licensed professional who represents the insurance company in the sale and servicing of insurance. The direct link between the insurance company and the policyholder.

Agreed Value Condition... condition found in some Property insurance policies that stipulates a certain value that will meet the coinsurance requirement. If the policy limit equals or exceeds this amount, the insured will not be assessed a coinsurance penalty. Also called Stated Amount Condition.

Appraisal Condition... a policy condition that outlines a procedure for when the insured and insurer disagree on the amount of the loss. The insured and insurer each select an appraiser. The two appraisers select an umpire. If the appraisers cannot agree on the amount of the loss, the umpire is consulted. The amount agreed to by any two of the three parties is the amount paid for the loss.

Arbitration Condition... a policy condition that is similar to the Appraisal condition; may be used to resolve other areas of disagreement besides those regarding the value of a loss.

Assessment Mutual Company... A Mutual insurance company that charges members a pro-rata share of losses at the end of each policy period.

Assumption Of Risk... defense against liability based on the common law principle that a person who knowingly exposes himself or herself to danger or injury assumes the risk of loss and cannot hold another person responsible for the loss.

Automatic Increase Insurance Endorsement... Dwelling policy endorsement that provides an annual increase in the Coverage A amount of 4%, 6% or 8%. An example of this is in a Homeowners policy that increases the Dwelling amount to account for an inflation in value.

Aviation Liability Insurance... insurance provided for owners of aircraft that covers liability for bodily injury, injury to passengers and property damage. Also provides Medical Payments coverage.

B

Bailee... a person or organization that has temporary possession of someone else's personal property.

Bailee's Customer Policy... Non filed Commercial Inland Marine form obtained by a bailee to cover loss or damage to customer's property in the bailee's custody, without regard to liability.

Bailment... delivery of property by the owner to someone else to be held for special purposes and then returned to the owner.

Best's... Organization that rates the financial stability of insurance companies doing business in the United States.

Bid Bond... type od Surety bond that guarantees that if a contractor's bid is accepted, the contractor will enter into a contract and provide the required Performance bond.

Binder... oral or written statement that provides immediate insurance protection for a specified period. Designed to provide temporary coverage until a policy is issued or denied.

Blanket Insurance... type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations.

Blanket Position Bond... Fidelity bond that covers losses arising from the dishonesty of one or more employees acting separately or in collusion. Provides a single limit of liability applicable to each employee involved in a loss.

Bodily Injury... defined in most policies to include injury, sickness, disease, and death resulting from any of these at any time.

Boiler and Machinery Insurance... insurance that covers the insured for losses arising out of the use of steam boilers or other machinery or equipment. May be included in the Commercial Package policy.

Broad Theft Coverage Endorsement... Dwelling policy endorsement that covers theft, attempted theft and vandalism and malicious mischief resulting from theft. Property is covered while it is on or off the premises.

Builders Risk Coverage Form... one of the Commercial Property coverage forms; covers commercial, residential or farm buildings that are under construction.

Business Auto Coverage Form... one of the Commercial Auto coverage forms; covers a business's owned, non owned and hired autos against liability and physical damage losses.

Business Income Coverage Form... Commercial Property coverage forms that pay for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operation until the property can be repaired, rebuilt or replaced with reasonable speed. Available with or without Extra Expense coverage.

Business Income From Dependent Properties - Broad Form... Commercial Property coverage form designed for insureds who business income is dependent on the ongoing operations of other businesses they do not own.

Business Liability... Liability that arises out of the conduct of a business.

Business Owners Policy... Package policy designed to provide broad Property and Liability coverage for small businesses.

Insurance Glossary C-E