Common Insurance Terms
Insurance Terms & Definitions
Insurance can be confusing, especially when policies contain terms you don't use every day. Our insurance glossary explains common insurance terms in plain English so you can better understand your coverage.
David Ison Insurance has served individuals and businesses in San Antonio and throughout Texas since 1978. If you have a question about your policy or a term you don't understand, call us at 210.490.1494.
BEGINS WITH:
A | B | C | D | E | F | G | H | I | J | L | M | N | O | P | R | S | T | U
A
Actual Cash Value (ACV)
Actual cash value is the current value of property after depreciation is taken into account.
For example, if a five-year-old piece of equipment is damaged, an actual cash value settlement generally considers what that equipment is worth today rather than what it would cost to purchase a brand-new replacement.
Actuary
An actuary is a professional who uses mathematics, statistics, and probability to evaluate risk.
Insurance companies use actuaries to help determine premiums, estimate future claims, establish reserves, and evaluate the financial risks associated with providing insurance.
Additional Insured
An additional insured is a person or organization added to another party's insurance policy for certain liability protection.
This is especially common in commercial insurance. For example, a general contractor may require a subcontractor to add the general contractor as an additional insured on the subcontractor's general liability policy.
The exact protection provided depends on the policy and endorsement.
Agent
An insurance agent helps individuals and businesses obtain and service insurance policies.
An independent insurance agent can generally work with multiple insurance companies rather than representing only one carrier.
Aggregate Limit
An aggregate limit is the maximum amount an insurance company will pay for certain covered claims during a policy period.
For example, a commercial general liability policy may have a $1 million per-occurrence limit and a $2 million general aggregate limit.
All-Risk Insurance
"All-risk" is an older insurance term generally referring to property coverage that insures against causes of loss unless they are specifically excluded.
Modern policies may instead use terms such as open perils or special causes of loss.
Even broad coverage contains exclusions, conditions, and limitations, so "all-risk" does not mean that absolutely everything is covered.
Allied Lines
Allied lines are property-related insurance coverages that may be written along with commercial property insurance.
Depending on the policy, these can involve exposures such as wind, sprinkler leakage, or business income.
Application
An insurance application provides information an insurance company uses to evaluate a person or business for coverage.
For a business, an application may ask about operations, sales, payroll, locations, employees, vehicles, previous claims, and the types and limits of insurance requested.
Accurate information is important because the insurer relies on the application when underwriting the policy.
Appraisal
An appraisal is an evaluation or estimate of the value of property.
The word can also refer to a process contained in some insurance policies for resolving disagreements concerning the amount of a covered property loss.
Arbitration
Arbitration is a method of resolving certain disputes outside of court.
An independent arbitrator or panel considers the dispute and makes a decision. Whether arbitration applies and whether the decision is binding depends on the agreement, policy, and applicable law.
Attractive Nuisance
An attractive nuisance is a potentially dangerous condition or object that may attract children.
Examples could include swimming pools or certain equipment. Property owners should take reasonable precautions to prevent unauthorized access and injuries.
Audit
An insurance audit reviews the actual exposures of a business after or during a policy period.
Auditable commercial policies may initially be priced using estimated payroll, sales, or other exposure information. The insurance company can later audit the business and adjust the premium based on the actual exposure.
Audits are common with workers' compensation and certain commercial general liability policies.
Aviation Insurance
Aviation insurance is specialized insurance designed for aviation-related risks.
Depending on the policy, coverage may be available for aircraft, aviation liability, passengers, and other aviation exposures.
B
Benefits
Benefits are payments or services provided under an insurance policy when a covered event occurs.
The benefits available depend on the type of insurance, policy terms, limits, conditions, and exclusions.
Binder
An insurance binder is temporary evidence of insurance coverage issued while the formal policy is being prepared.
A binder generally identifies important information such as the insured, insurance company, effective date, type of coverage, and limits.
Blanket Coverage
Blanket coverage applies one insurance limit across multiple covered items, properties, or locations rather than assigning a separate limit to each one.
For example, a business with several locations might have certain property insured under a single blanket limit.
Bodily Injury Liability
Bodily injury liability coverage can help protect you when you are legally responsible for bodily injury to another person.
Depending on the policy and circumstances, covered expenses may include medical costs, lost income, legal defense expenses, settlements, or judgments.
Broker
An insurance broker generally works on behalf of the insurance buyer in seeking insurance coverage from available insurance markets.
The legal distinction between an agent and broker can vary by jurisdiction and circumstances.
Burglary
Burglary generally involves unlawful entry into a building or premises with the intent to commit a crime.
Insurance policies can contain specific definitions and requirements concerning theft and burglary, so the actual policy language determines whether a particular loss is covered.
C
Carrier
A carrier is the insurance company providing the insurance policy.
It may also simply be called the insurer or insurance company.
Casualty Insurance
Casualty insurance is a broad category of insurance primarily involving liability exposures rather than direct physical damage to property.
Examples can include general liability, commercial auto liability, and workers' compensation.
Catastrophe
A catastrophe is a severe event that causes widespread or unusually large losses.
Hurricanes, major hailstorms, tornadoes, wildfires, and other natural disasters can produce catastrophic insurance losses.
Certificate of Insurance (COI)
A Certificate of Insurance, commonly called a COI, is a document providing evidence of certain insurance coverage in effect at the time the certificate is issued.
Businesses frequently request COIs from contractors, subcontractors, vendors, tenants, and other parties before allowing work to begin.
A certificate itself generally does not change the coverage provided by the insurance policy.
Claim
An insurance claim is a request for payment or other assistance under an insurance policy following a loss or event that may be covered.
The insurance company investigates the claim and determines coverage based on the facts of the loss and the terms of the policy.
Claim Severity
Claim severity refers to the average or expected financial cost of individual insurance claims.
A type of business that has relatively few accidents but potentially very expensive losses may have high claim severity.
Classification
An insurance classification is a category used by insurance companies to identify and rate a particular type of exposure.
For businesses, classifications can be based on operations, employee duties, products, services, and other factors.
Proper classification is particularly important for workers' compensation and commercial general liability insurance.
Coinsurance
Coinsurance in property insurance is a policy provision requiring the insured to carry insurance equal to a specified percentage of the property's value to receive full payment for a partial covered loss.
Failure to satisfy the coinsurance requirement can result in a reduced claim payment.
Coinsurance can mean something different in health insurance, where it usually describes the percentage of covered medical expenses paid by the insured after the deductible.
Commercial Lines Insurance
Commercial lines insurance refers to insurance designed for businesses rather than individuals.
Examples include commercial property, general liability, commercial auto, workers' compensation, professional liability, cyber insurance, and commercial umbrella insurance.
Commercial Package Policy
A commercial package policy combines multiple types of business insurance into a single policy.
A business may, for example, combine commercial property and general liability with additional coverages appropriate for its operations.
Comparative Negligence
Comparative negligence is a legal concept used to determine responsibility when more than one party contributed to an accident.
The amount someone can recover may be affected by the percentage of responsibility assigned to each party. The exact rules vary by state.
Concealment
Concealment generally refers to intentionally withholding material information relevant to an insurance policy or claim.
Insurance companies rely on accurate information when deciding whether to insure a risk, determining premiums, and investigating claims.
Consequential Loss
A consequential loss is an indirect loss resulting from another loss.
For example, a fire may directly damage a business's building while the resulting shutdown causes the business to lose income.
Contract
A contract is a legally enforceable agreement between parties.
An insurance policy is a contract between the insured and insurance company that describes the coverage provided and the responsibilities of each party.
Contributory Negligence
Contributory negligence is a legal concept involving situations where an injured party's own actions contributed to the loss.
The rules and effect of contributory negligence vary by jurisdiction.
Coverage
Coverage describes the protection provided by an insurance policy.
The actual scope of coverage is determined by the policy's insuring agreements, definitions, limits, endorsements, conditions, and exclusions.
D
Declarations Page
The declarations page, sometimes called the dec page, summarizes important information about an insurance policy.
It commonly shows the named insured, policy period, insured locations or vehicles, coverage limits, deductibles, and premium.
Deductible
A deductible is the amount the insured is responsible for paying toward a covered loss before the insurance company pays its portion, subject to the terms of the policy.
For example, if you have a $1,000 deductible and a covered property loss is $10,000, the deductible generally reduces the insurance payment by $1,000.
Depreciation
Depreciation is the reduction in the value of property due to factors such as age, wear and tear, condition, and obsolescence.
Depreciation is particularly important when comparing actual cash value coverage with replacement cost coverage.
Direct Writer
A direct writer is an insurance company that sells insurance through its own employees or agents rather than primarily through independent agents or brokers.
Dividend
An insurance dividend is a return of a portion of premium or surplus under certain participating insurance arrangements.
Dividends aren't guaranteed unless specifically provided otherwise.
E
Earned Premium
Earned premium is the portion of an insurance premium that applies to the period during which the insurance company has already provided coverage.
Employers Liability Insurance
Employers liability insurance provides protection against certain employee injury claims that may fall outside the benefits provided by workers' compensation insurance.
It is commonly included as part of a workers' compensation policy.
Endorsement
An endorsement is a document that changes an insurance policy.
An endorsement may add coverage, remove coverage, change limits, add an insured, modify conditions, or otherwise alter the original policy.
Because endorsements can substantially change coverage, they are an important part of reviewing an insurance policy.
Exclusion
An exclusion identifies something that an insurance policy does not cover or limits the circumstances under which coverage applies.
Understanding exclusions is just as important as understanding the coverage shown on the declarations page.
Exposure
An exposure is a condition or activity that creates the possibility of a loss.
Insurance companies may measure exposures using payroll, sales, number of employees, vehicle count, property values, square footage, or other measures depending on the type of insurance
F
FAIR Plan
A FAIR Plan is a state-related insurance mechanism intended to help certain property owners obtain basic property insurance when coverage is difficult to obtain through the standard insurance market.
Availability and requirements vary by state.
Fidelity Bond
A fidelity bond can protect a business against certain losses caused by dishonest acts committed by employees.
Coverage depends on the particular bond or crime policy.
Fiduciary
A fiduciary is someone who has a legal or ethical responsibility to act in the interests of another person or organization.
Examples can include individuals responsible for managing certain employee benefit plans or financial assets.
Financial Responsibility Law
A financial responsibility law requires vehicle owners or operators to demonstrate their ability to pay for certain damages arising from an automobile accident.
Auto liability insurance is the most common way of satisfying these requirements.
Fire Insurance
Fire coverage protects insured property against covered losses caused by fire.
Today, fire coverage is commonly included within broader homeowners or commercial property policies rather than purchased as a standalone policy.
Fleet Policy
A fleet insurance policy covers multiple vehicles owned or operated by the same business under one commercial auto insurance program.
Floater
A floater is insurance designed to cover certain movable property that may travel between locations.
Examples can include equipment, tools, jewelry, or other property that isn't always kept at one permanent location.
Flood Insurance
Flood insurance provides coverage for certain losses caused by flooding.
Standard homeowners and commercial property policies generally exclude flood, making separate flood insurance important for properties with flood exposure.
G
Grace Period
A grace period is an additional period after a payment due date during which payment may be accepted without coverage terminating, when the applicable policy provides such a period.
Grace periods vary by policy and type of insurance and should never be assumed to apply.
G
H
back to topHazardA specific situation that introduces or increases the probability of the occurrence of a loss arising from a peril, or that may influence the extent of a loss.
I
back to topIncurred lossesLosses occurring within a fixed period, whether adjusted and paid or not.InsuredAn individual or business organization protected in case of loss of property or life under the terms of an insurance policy.
J
back to topJoint Underwriting Association (JUA)A system used to provide insurance to individuals or businesses that fail to secure coverage in the voluntary market. Although only certain companies issue policies at one rate level and handle claims for those insured, all of the companies providing insurance in that state must bear the ultimate costs.
L
Liability Limit
A liability limit is the maximum amount an insurance policy will pay for covered liability claims, subject to the policy's terms.
Policies may contain separate limits per person, per occurrence, per accident, or in the aggregate.
Litigation
Litigation is the process of resolving a legal dispute through the court system.
Liability insurance can be particularly valuable because covered legal defense expenses can become substantial even before a lawsuit is resolved.
Loss
A loss is an event that results in financial damage and may lead to an insurance claim.
Whether a particular loss is covered depends on the insurance policy.
Loss Ratio
A loss ratio compares an insurance company's incurred losses with the premiums it has earned.
Insurance companies use loss ratios as one measure of underwriting performance.
M
Malicious Mischief
Malicious mischief generally refers to intentional damage to another person's property.
Depending on the policy, certain vandalism or malicious mischief losses may be covered.
Multi-Peril Policy
A multi-peril policy combines protection against multiple types of risks within a single insurance policy.
Multiple-Line Policy
A multiple-line policy combines more than one category of insurance coverage, such as property and liability coverage.
Mutual Insurance Company
A mutual insurance company is owned by its policyholders rather than outside stockholders.
Depending on the company and financial results, eligible policyholders may sometimes receive dividends.
N
Named Perils
A named-perils policy covers only the causes of loss specifically identified in the policy.
If a cause of loss isn't listed, coverage generally does not apply unless another provision provides coverage.
Negligence
Negligence generally means failing to exercise the level of reasonable care expected under the circumstances.
Negligence is an important concept in liability insurance because many liability claims allege that someone's failure to act reasonably caused injury or property damage.
No-Fault Auto Insurance
No-fault auto insurance systems provide certain benefits to insured drivers and passengers without first determining who caused the accident.
Rules vary significantly by state.
Notice of Loss
Notice of loss is the notification provided to an insurance company after an accident or loss that may result in a claim.
Policies commonly require losses to be reported promptly or within specified time requirements.
O
back to topOccurrenceA continued or repeated exposure to conditions, which results in a loss. Also, a policy clause stipulating all damages that arise out of the same general conditions are considered as arising from one occurrence.
P
Package Policy
A package policy combines multiple insurance coverages into one policy.
Business Owner's Policies and commercial package policies are common examples.
Peril
A peril is a cause of loss.
Examples include fire, theft, wind, hail, and lightning.
Policyholder
The policyholder is the individual or organization that owns or is named on an insurance policy.
Depending on the policy, the policyholder may also be referred to as the named insured.
Pool
An insurance pool is an arrangement in which multiple insurance companies or participants share certain risks.
Pools may be used when risks are difficult for one insurer to assume alone.
Premises
Premises generally refers to a location identified or described in an insurance policy.
The meaning can vary depending on the specific policy language.
Proximate Cause
Proximate cause is a legal concept used to identify the primary cause of a loss.
It can become important when determining responsibility or whether an insurance policy responds to a particular event.
R
Rate
An insurance rate is the price assigned to a particular unit of exposure and is used in calculating the insurance premium.
Rating Bureau
A rating or advisory organization collects and analyzes insurance data and may develop classifications, loss costs, forms, or other information used by insurers.
Rating Territory
A rating territory is a geographic area used by an insurance company when determining premiums.
Locations within a territory may share certain characteristics or loss exposures.
Reinsurance
Reinsurance is insurance purchased by an insurance company to transfer part of its own risk to another insurer, known as a reinsurer.
Reinsurance helps insurance companies manage large individual losses and catastrophic events.
Rental Value Insurance
Rental value coverage can protect against certain lost rental income when covered property damage prevents rental property from being used.
Coverage and terminology vary by policy.
Replacement Cost
Replacement cost coverage generally values covered property based on the cost to replace damaged property with new property of like kind and quality, without deducting for depreciation, subject to the policy's terms and limits.
This differs from actual cash value, which generally considers depreciation.
Reserve
An insurance reserve is money an insurance company sets aside to pay anticipated claim obligations.
Retrospective Rating
Retrospective rating is a commercial insurance pricing method in which the final premium is adjusted based partly on the insured's actual loss experience during the policy period, subject to specified minimums and maximums.
Rider
A rider is a document that adds to or changes the terms of an insurance policy.
The term is used more frequently in certain types of insurance, while property and casualty policies commonly use the term endorsement.
Risk
Risk can refer to the possibility of financial loss or to the person, property, or business being insured.
Risk Control
Risk control involves identifying hazards and taking steps to reduce the frequency or severity of potential losses.
Insurance companies may provide inspections, safety recommendations, or other risk-control services.
Risk Management
Risk management is the process of identifying, evaluating, and controlling risks that could cause financial loss.
Insurance is one part of risk management, along with avoiding, reducing, transferring, or retaining certain risks.
S
Salvage
Salvage is damaged property that still has value after an insurance loss.
Depending on the claim and policy, an insurer that pays for damaged property may obtain rights to the salvage.
Schedule
A schedule is a list of specific items, locations, vehicles, equipment, or other property insured under a policy.
Self-Insurance
Self-insurance means retaining some or all of a financial risk rather than transferring it to an insurance company.
Large organizations sometimes establish formal self-insurance programs to fund predictable losses.
Short-Rate Cancellation
Short-rate cancellation is a method of calculating the return premium when a policy is canceled before expiration that may include a penalty or less favorable refund than a pro-rata cancellation.
The applicable cancellation method depends on the policy and circumstances.
Standard Provisions
Standard provisions are policy terms commonly required by law, regulation, or insurance forms.
They establish certain rights, responsibilities, and conditions applying to the insurance contract.
Stock Insurance Company
A stock insurance company is owned by shareholders.
This differs from a mutual insurance company, which is owned by its policyholders.
Subrogation
Subrogation is the insurance company's right, after paying a covered claim, to pursue another party that may be legally responsible for the loss.
For example, if another contractor damages your insured property and your insurance company pays the covered claim, the insurer may seek reimbursement from the responsible contractor or its insurance company.
Surety Bond
A surety bond is a three-party agreement designed to guarantee that a specific obligation will be performed.
The three parties are generally the principal, the obligee, and the surety.
Unlike traditional insurance, a surety may seek reimbursement from the principal if it pays a valid claim under the bond.
Suretyship
Suretyship is the arrangement under which one party guarantees the obligation or performance of another party.
Surplus Lines Insurance
Surplus lines insurance provides access to insurance from eligible non-admitted insurers when coverage may not be available or appropriate in the standard admitted market.
Surplus lines insurance is commonly used for unusual, specialized, or higher-risk businesses and properties.
Syndicate
An insurance syndicate is a group of insurers or underwriters that participate together in insuring certain risks.
Sharing the exposure can make it possible to insure risks that may be too large or specialized for a single insurer.
T
Theft Insurance
Theft coverage protects against certain losses involving stolen property.
The scope of theft coverage varies by policy, and exclusions, limitations, security requirements, and deductibles may apply.
Tort
A tort is a civil wrong, separate from a breach of contract, that can result in legal liability.
Negligence that causes bodily injury or property damage is a common example of a tort.
U
Underwriter
An underwriter evaluates insurance applications and determines whether an insurance company is willing to insure a particular risk and, if so, under what terms.
An underwriter may consider factors such as claims history, business operations, property characteristics, drivers, payroll, sales, and requested coverage.
Underwriting Profit
Underwriting profit is the amount remaining when an insurance company's earned premiums exceed its claims and underwriting expenses.
Investment income is generally considered separately.
Have a Question About an Insurance Term?
Insurance policies can contain hundreds of pages of definitions, conditions, endorsements, and exclusions. A simple definition on a glossary page can't determine how coverage applies to a particular claim.
If you're a David Ison Insurance customer and have a question about something in your policy, we're happy to help explain it.
For questions about personal or business insurance in San Antonio and throughout Texas, call David Ison Insurance at 210.490.1494.
