Property & Casualty Insurance Glossary

A

• Act of God: A natural event not preventable by human agency, such as an earthquake, lightning strike, or tornado.

• Actual Cash Value (ACV): A method of valuing property that calculates the cost to replace an item minus depreciation for age and wear.

• Additional Insured: A person or entity added to a policy (besides the policyholder) to be protected by that policy's coverage.

• Adjuster: The representative (either from the insurance company or an independent hire) who investigates a claim and determines the settlement amount.

• Adverse Selection: The tendency of people with higher risks (like those in flood zones) to buy more insurance than those with lower risks.

• Agent vs. Broker: An Agent generally represents the insurance company; a Broker generally represents the client/buyer.

• Aggregate Limit: The maximum amount an insurer will pay for all covered claims during a policy period (usually one year), regardless of the number of claims filed.

• Appraisal: An assessment by a claims representative to estimate the amount of damage to property.

• Audit (Premium Audit): A review of the insured's records (payroll or sales) at the end of the policy term to determine if the initial premium paid was accurate. Common in Workers' Comp and General Liability.

B

• Binder: A temporary contract providing proof of coverage until the permanent policy is issued.

• Blanket Limit: A single limit of insurance that applies to multiple locations or types of property, rather than assigning a specific limit to each item.

• Bodily Injury (BI): Physical injury, sickness, or disease sustained by a person.

• Builders Risk: A specialized property policy that covers a building while it is under construction or renovation, including the materials and equipment on site.

• Business Interruption Insurance: Coverage that replaces lost business income and pays for operating expenses if a company must temporarily shut down due to a covered loss (like a fire).

• Business Owners Policy (BOP): A package policy for small to mid-sized businesses that combines Property, General Liability, and Business Interruption coverage into one bundle.

C

• Certificate of Insurance (COI): A one-page document provided to clients or vendors that serves as proof that you carry insurance.

• Claim: A formal request by the policyholder for payment after a loss.

• Claims-Made Policy: A type of liability policy (common in D&O and Professional Liability) that only covers claims filed while the policy is active, regardless of when the incident actually occurred. Contrast with Occurrence Policy.

• Coinsurance Clause: A penalty clause in property policies. It requires you to insure your property for a certain percentage of its value (usually 80-90%). If you insure for less, you may be penalized on claim payouts.

• Collision Coverage: Auto coverage for damage to your vehicle from hitting another car or object.

• Commercial Auto Insurance: Coverage for vehicles used for business purposes. It covers liability for bodily injury and property damage, as well as damage to the vehicle itself.

• Comprehensive Coverage: Auto coverage (also called "Other Than Collision") for non-crash damage like theft, hail, fire, or hitting a deer.

• Crime Insurance: Coverage for business-related crime losses that are typically excluded from property policies, such as employee dishonesty, forgery, robbery, and wire transfer fraud.

• Cyber Liability Insurance: Protects businesses against financial losses caused by cyber incidents, including data breaches, hacking, ransomware, and the legal costs associated with notifying customers.

D

• Declarations Page ("Dec Page"): The front section of a policy that summarizes who is insured, what is covered, the policy dates, and the dollar limits.

• Deductible: The amount of money the insured must pay out-of-pocket toward a loss before the insurance company pays the rest.

• Depreciation: The decrease in value of property over time due to wear, tear, and age.

• Directors & Officers Liability (D&O): Protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, or other parties for actual or alleged wrongful acts in managing a company.

E

• Earned Premium: The portion of the premium that the insurance company has "earned" because that time period has already passed.

• Employment Practices Liability (EPLI): Coverage for employers against claims made by employees alleging discrimination, wrongful termination, harassment, and other employment-related issues.

• Endorsement: A written amendment attached to a policy that changes the terms (e.g., adding a new car or increasing limits).

• Errors and Omissions (E&O): Also known as Professional Liability. It protects professionals (consultants, real estate agents, accountants) against claims of negligence or inadequate work.

• Exclusion: Specific situations, perils, or property listed in the policy that are not covered.

• Experience Rating: A method of calculating premiums based on the insured's own historical loss record (common in Workers' Comp).

F

• Fiduciary Liability: Protects businesses against claims of mismanagement of employee benefit plans (like 401ks or health plans).

• First Named Insured: The primary person or business listed on the policy, who is responsible for paying premiums and managing the policy.

• Flood Insurance: A separate policy (usually through the NFIP or private market) that covers damage to property caused by flooding, which is typically excluded from standard property policies.

G

• General Liability (GL): The foundational business policy. It covers claims alleging that the business caused bodily injury or property damage to a third party (e.g., a customer slips and falls in your store).

H

• Hard Market: An industry phase characterized by higher premiums, stricter underwriting standards, and less capacity (insurers writing fewer policies).

• Hazard: A condition that increases the chance of a loss (e.g., a pile of oily rags is a fire hazard).

• Hired & Non-Owned Auto: Coverage for liability arising from vehicles the business does not own but uses (e.g., an employee renting a car for a work trip or using their personal car for a sales call).

• Hold Harmless Agreement: A contract clause where one party agrees not to hold the other liable for damages.

• Homeowners Insurance: A package policy for dwelling owners that covers the physical structure, personal belongings, and personal liability.

I

• Incurred But Not Reported (IBNR): Losses that have happened but haven't been reported to the insurer yet.

• Indemnification: The principle of insurance: to return the insured to the financial position they were in before the loss occurred, without profiting.

• Inland Marine Insurance: Despite the name, this covers property in transit over land, as well as movable property like construction tools, camera equipment, or fine art that moves between locations.

L

• Limit: The maximum amount of money an insurance company will pay for a covered claim.

• Loss Payee: A party (often a bank or lender) listed on a policy who is entitled to payment if the insured property is damaged.

• Loss Ratio: A measurement of an insurer's profitability, calculated by dividing claims paid by premiums earned.

• Loss Runs: Reports provided by the insurance company listing the insured's claims history (dates, amounts paid, and open reserves). New brokers usually require these to provide a quote.

N

• Named Peril: A policy that covers only the specific causes of loss listed in the text (e.g., fire, lightning, wind).

• Negligence: Failure to use reasonable care, resulting in damage or injury to another.

O

• Occurrence Policy: A policy that covers claims for injuries or damage that happen during the policy period, even if the claim is filed years later (after the policy has expired).

P

• Peril: The specific cause of a loss (e.g., Fire is the peril).

• Personal Injury: In the insurance world, this usually refers to "reputational" injury rather than physical injury. It covers libel, slander, false arrest, and invasion of privacy.

• Premium: The price paid for the insurance policy.

• Product Liability: Protects manufacturers, distributors, and retailers against claims that a product they sold caused injury or damage.

• Proof of Loss: A formal document the insured must sign and submit to the insurer to substantiate a claim.

• Pro-Rata Cancellation: Canceling a policy where the insurer returns the unearned premium in full, without keeping a penalty fee.

R

• Renters Insurance: A policy for tenants that covers their personal property and personal liability, but excludes the building structure.

• Replacement Cost: A valuation method that pays to replace damaged property with new materials of like kind and quality, without deducting for depreciation.

• Reservation of Rights: A letter from an insurer stating they are investigating a claim but reserving the right to deny coverage later if the facts show it isn't covered.

• Retention: Similar to a deductible; the amount of risk the insured assumes themselves.

S

• Short-Rate Cancellation: A financial penalty applied when the policyholder cancels a policy before the expiration date, meaning they get back less than a full pro-rata refund.

• Subrogation: The process where an insurer pays a claim to their client, then pursues the at-fault third party to recover the money.

• Surety Bond: A contract (not strictly insurance) guaranteeing that a business will fulfill a specific obligation or comply with a law (e.g., a contractor finishing a project).

U

• Umbrella / Excess Liability: A policy that provides extra liability limits above and beyond your primary General Liability, Auto, or Homeowners policies.

• Underwriting: The process the insurer uses to evaluate risks, decide whether to insure them, and set the price.

V

• Vacancy Clause: A policy provision that limits or removes coverage if a building is left unoccupied for a specific period (often 30 or 60 days).

W

• Waiver of Subrogation: An agreement where the insurer gives up their right to sue a third party after paying a claim (often requested in construction contracts).

• Workers' Compensation: Mandatory insurance in most states that covers medical expenses and lost wages for employees who get injured or sick on the job.