Insurance Terminology
A Glossary of Insurance terms that might sound "foreign" to you!
Some of these terms reference corresponding articles that we have provided in the "Articles and Ideas" section of this website for a greater understanding of some complex insurance concepts.
Actual Cash Value (ACV) - the basic valuation provision found in property policies, determined by subtracting depreciation from the property's replacement value (see Valuation article).
Additional Insured - individual or business not listed as named insured in declarations, but added by endorsement so that they are additionally covered by your insurance policy.
Advertising Injury - injury arising out of oral or written publication that slanders or libels a person or organization, invades their privacy or infringes upon ideas, style, copyright, title or slogan.
Aggregate Limits - maximum overall limit of liability for a policy period.
Agreed Value - property valuation method whereby insurer and insured agree to coverage amount. In such cases, the coinsurance requirement is waived. Often used for antique/collector vehicles, jewelry, artwork, etc.
Basic Form - type of policy which lists the basic perils that are covered; if not listed, it's not covered (see Basic/ Broad/Special article), and losses are adjusted on an actual cash value basis.
Boiler and Machinery Coverage - commercial property insurance used to cover steam boilers, pressure vessels, air conditioning equipment, air compressors, turbines and other similar types of machinery for breakdown.
Broad Form - type of policy which lists the broad perils that are covered; if not listed, it's not covered (see Basic/ Broad/Special article). Building losses are adjusted on a replacement cost basis, and contents are adjusted on an actual cash value basis.
Certified Insurance Counselor (CIC) - professional designation administered by the Society of Certified Insurance Counselors requiring the passing of 5 examinations on various insurance subjects.
Certified Insurance Service Representative (CISR) - professional designation administered by the Insurance Agents & Brokers Group, Inc., requiring the passing of 4 examinations on various insurance subjects.
Chartered Financial Consultant (ChFC) - professional designation administered by The American College requiring the passing of exams on subjects concerning financial counsel.
Chartered Life Underwriter (CLU) - professional designation administered by The American College requiring the passing of exams on subjects concerning the insuring of human life values.
Claims-Made Coverage - applies to commercial liability claims made after the retroactive date and during the claims made policy period, regardless of when the injury or damage occurred.
Coinsurance - common property provision that requires an insured to carry insurance limits equal to a specified percentage (often at least 80%) of a property's actual cash value in return for a reduced rate.
Combined Single Limit - removes sub-limits for both bodily injury liability and property damage liability, combining them into one single limit of protection (see Split Limits).
Comprehensive - auto coverage that insures theft or damage to an insured's car from hazards including fire, flood or vandalism. Also known as Other Than Collision.
Crime Coverage - commercial policy that provides coverage in the event that property is taken by burglary, safe burglary, robbery, extortion or theft.
Declarations - insurance policy component that indicates the named insured and address, policy term, the amount of insurance, policy forms, deductible, premium and related information that is specific to the insured.
Deductibles - the initial amount, or the first dollar cost paid or absorbed by the insured in the event of a loss.
Directors and Officers Liability - a specialty liability policy that provides coverage for the directors and officers of a corporation who may become liable for failure to act in the corporation's best interest.
Drive Other Car Coverage - extends business auto coverage to non business (personal) exposures of named individuals who may not own a vehicle. This typically occurs to individuals who are furnished company cars, but do not own or carry their own personal auto insurance.
Electronic Data Processing Form (EDP) - coverage form that insures electronic data processing equipment, data processing media and extra expenses and business interruption incurred in the loss of media.
Employee Theft/Employee Dishonesty - crime coverage that covers losses resulting from employee dishonesty.
Errors and Omissions - liability insurance covering professionals for negligent acts.
First Party Benefits - benefits that are payable to an insured, such as medical expense, funeral, income loss, accidental death. Minimum requirements vary from state to state.
Full Tort - tort option that permits an insured to sue for specific damages plus non-economic damages such as pain and suffering, regardless if the injury was serious or not.
(see Tort Options article).
Functional Replacement Cost - basic valuation provision that permits the insurer to replace damaged property with a functional equivalent. Used with older properties.
(see Valuation article).
Hired and Non-Owned Auto - businessowners endorsement that provides liability coverage for businessowner auto exposures; typically added when a business does not own any vehicles, but employees use their own vehicles in the course of working for the business.
Hired Car Property Damage - businessowners endorsement that provides physical damage coverage for hired cars used for business.
Independent Agents - insurance agents who are independent contractors and enter into agency and marketing arrangements with various insurance companies with the purpose of providing insurance coverage to their clients.
Inland Marine Coverage - coverage for virtually any type of property that may be transported, whether across land, in air, or by sea.
Installation Floaters - insures property during transit or installation at the construction or installation site.
Insured - anyone who may be covered by the policy. May include individuals who are not named in the policy, such as resident relatives or minor children.
Limited Tort - tort option that limits the insured's right to sue to specific out-of-pocket expenses (excludes such non-economic damages as pain and suffering), except in cases involving serious injury or death. (see Tort Options article).
Loss Payable Clause - provision that reflects the legitimate interest that a finance company has in personal property in that it has a financial interest (such as a mortgage or loan against the property).
Market Value - the price one would pay based upon free market conditions, adjusting for supply and demand (see Valuation article).
Misrepresentation - statements made by an applicant or insured that are not true. If a misrepresentation is material (i.e., insurer would not have written coverage knowing the fact), coverage may be voided.
Other Than Collision - auto coverage that insures theft or damage to an insured's car from hazards including fire, flood or vandalism. Also known as Comprehensive.
Peril - cause of loss (i.e., fire, theft, lightning, etc.).
Personal Injury Liability - homeowner's endorsement that modifies the bodily injury definition to include libel, slander, malicious prosecution, defamation of character, invasion of privacy, etc.
Umbrella - commercial or personal liability policy that provides coverage in excess of the required underlying policy limits...covers "over" the underlying policies to raise the limits.
Products and Completed Operations - commercial liability term addressing the exposure caused by the manufacturing of products and/or the completion of operations away from the insured location.
Replacement Cost - valuation provision that replaces old damaged property with new replacement property at today's replacement cost, without any deduction for depreciation (see Valuation article).
Scheduled Personal Property - homeowner endorsement that provides agreed value coverage for items that have values in excess of the policy limits, usually at "all-risk" perils and with no deductible.
Short Rate Cancellation - a mid-term cancellation requested by the insured wherein a penalty is charged against the return premium...the formula is pre-determined by the state's insurance commission.
Special Form - type of policy, which lists the exclusions from the coverage ("all perils are covered except...") (see Basic/ Broad/Special article).
Split Limits - specifies different sub-limits of coverage for different types of losses (see Combined Single Limit).
Stacking - procedure whereby an insured can add together the limits of the uninsured or underinsured motorist coverage limits for all autos insured under a policy (2 cars doubles the coverage, three cars triples it, etc.).
Stated Amount - valuation provision that establishes coverage amounts on property at policy inception and pays the full amount regardless of actual cash value (see Valuation article).
Subrogation - legal process that permits the insurance company to "go after" third parties who, because of their negligence cause the company to pay a claim.
Surety Bonds - type of bond that guarantees that a specific obligation will be fulfilled.
Surplus Lines - broad range of risk exposures that are not available or cannot be procured through admitted or authorized markets (regular or standard marketplace).
Underinsured Motorist Insurance - auto coverage that protects the auto insured in the event that a negligent motorist causes an accident and carries limits that are too low t pay what the insured is due (in PA, only pertains to Bodily Injury losses to the insured).
Uninsured Motorist Insurance - auto coverage that protects the auto insured in the event that an irresponsible driver (one driving without insurance) causes an accident (in PA, only pertains to Bodily Injury losses to the insured).
Valuable Papers and Records Form - covers the preservation or reconstruction cost to generate records such as blueprints, deeds or historical records that were destroyed or damaged due to a covered loss.
The information on these pages is intended to be accurate at the time posted. It is for general informational purposes only. It may not be applicable in your area or to your specific situation; insurance policy terms and limits may vary by jurisdiction. This information is not intended to constitute legal, accounting or financial advice.