The majority of people have insurance, and most of the time they have various forms of insurance; such as homeowners, auto, business insurance, etc. A ValuePenguin survey found that 47% of homeowners are unsure of what their insurance covers. Because insurance has its own terms that can be tough to understand, they can cause a lot of confusion. Whether you’d like to know what certain terms mean in your policy or you’re new to the insurance workforce, we’ve broken down (with the help of NAIC) 30 insurance terms we think are important to comprehend.
Insurance Terms:
Asset – probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. An asset has three essential characteristics: It embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows; A particular entity can obtain the benefit and control others’ access to it; and The transaction or other event-giving rise to the entity’s right to or control of the benefit has already occurred.
Blanket Coverage – coverage for property and liability that extends to more than one location, class of property or employee.
Business Interruption – loss of income as a result of property damage to a business facility.
Business owners Policy – business insurance typically for property, liability and business interruption coverage.
Casualty Insurance – a form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.
Commercial General Liability – flexible & broad commercial liability coverage with two major sub-lines: premises/operations sub-line and products/completed operations sub-line.
Conditions – requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.
Crop – coverage protecting the insured against loss or damage to crops from a variety of perils, including but not limited to fire, lightening, loss of revenue, tornado, windstorm, hail, flood, rain, or damage by insects.
Deductible – Portion of the insured loss (in dollars) paid by the policy holder
Dwelling Property/Personal Liability – a special form of package policy composed of dwelling fire and/or allied lines, and personal liability insurance.
Excess and Umbrella Liability – liability coverage of an insured above a specific amount set forth in a basic policy issued by the primary insurer; or a self insurer for losses over a stated amount; or an insured or self insurer for known or unknown gaps in basic coverages or self insured retentions.
Exposure – risk of possible loss.
Hazard – circumstance which tends to increase the probability or severity of a loss.
Homeowners Insurance – a package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical. Includes mobile homes at a fixed location.
Independent Agent – a representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.
Inland Marine – coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as live animals, property with antique or collector’s value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.
Insured – party(ies) covered by an insurance policy.
Limits – maximum value to be derived from a policy.
Liability – a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.
Liquor Liability – coverage for the liability of an entity involved in the retail or wholesale sales of alcoholic beverages, or the serving of alcoholic beverages, to persons who have incurred bodily injury or property damage arising from an intoxicated person.
Moral Hazard – personality characteristics that increase probability of losses. For example not taking proper care to protect insured property because the insured knows the insurance company will replace it if it is damaged or stolen.
National Association of Insurance Commissioners (NAIC) – the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.
Occurrence – an accident , including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured.
Peril – the cause of property damage or personal injury, origin of desire for insurance. “Cause of Loss”
Product Liability – insurance coverage protecting the manufacturer, distributor, seller, or lessor of a product against legal liability resulting from a defective condition causing personal injury, or damage, to any individual or entity, associated with the use of the product.
Replacement Cost – the cost of replacing property without a reduction for depreciation due to normal wear and tear.
Subrogation – situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.
Umbrella and Excess – coverage for the liability of a commercial venture above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.
Valued Policy – an insurance contract for which the value is agreed upon in advance and is not related to the amount of the insured loss.
Warranty – coverage that protects against manufacturer’s defects past the normal warranty period and for repair after breakdown to return a product to its originally intended use. Warranty insurance generally protects consumers from financial loss caused by the seller’s failure to rectify or compensate for defective or incomplete work and cost of parts and labor necessary to restore a product’s usefulness. Includes but is not limited to coverage for all obligations and liabilities incurred by a service contract provider, mechanical breakdown insurance and service contracts written by insurers.
