Terms

Actual Cash Value (ACV): Cost to repair or replace damaged property with materials of like kind and quality, less depreciation

Binder: A temporary insurance policy that expires at the end of a specific time period or when a permanent policy is written. A binder is given to an applicant for insurance during the time it takes the insurance company to complete the policy paperwork

Bond: A written agreement in which one party, the surety, guarantees the performance or honesty of a second party, the principal (obligor), to the third party (obligee) to whom the performance or debt is owed

Business Auto Policy: Auto Policy for businesses that includes auto liability and auto physical damage coverages

Certificate of Insurance: A document providing evidence that insurance has been purchased

Coinsurance Provision: An insurance provision for property coverages in which the policyholder must carry an amount of insurance that is at least equal to a set percentage of the value of the property in order to receive full payment of a loss

Contract: An agreement between two or more parties with characteristics of mutual assent, competent parties, a valid consideration and legal subject

Deductible: The amount of loss which is paid or absorbed by the insured prior to determining the insurance company’s liability

Deposit Premium: The amount of premium required at the beginning of a policy prior to the actual premium being determined

Earned Premium: The amount of premium that has been used for certain periods of time

Effective Date: The date on which an insurance binder or policy goes into effect

Endorsement: A document attached to an insurance policy that changes the original policy provisions

Evidence of Insurability: Any statement or proof of a person’s physical condition, occupation, etc., affecting acceptance of the applicant for Insurance Net

Excess and Surplus Lines Insurance: Coverage that is provided by insurers not licensed in the states where the risk is located

Exclusions: Specified hazards listed in a policy for which benefits will not be paid

General Liability Insurance: Insurance protecting businesses from most liability exposures other than automobile and professional liability

Insurability: The condition of the individual wishing to be insured, including their health, susceptibility to injury and life expectancy

Insurance to Value: Insurance written in an amount equal to the value of the property of which meets coinsurance requirements

Insured: The party who is being insured. In life insurance, it is the person because of his or her death the insurance would pay out a death benefit to a designated beneficiary

Lapse: Termination of a policy due to the policy owner’s failure to pay the premium within the grace period

Liability: The legal obligation to pay a monetary award for injury or damage caused by one’s negligent or statutorily prohibited action

Loss Control: A technique that is put in place to reduce the possibility that a loss will occur or reduce the severity of those that do occur

Package Policy: A policy providing several different coverages combined into one policy. Refers to a policy providing both general liability insurance and property insurance

Peril: Cause of loss such as fire, windstorm, collision, etc.

Personal Injury Protection (PIP): An automobile insurance coverage mandated by law in some states. The statutes typically require insurers to provide or offer to provide first-party benefits for medical expenses, loss of income, funeral expenses and similar expenses without regard to fault

Primary Policy: The insurance policy that pays first when you have a loss that’s covered by more than one policy

Professional Liability: Coverage designed to protect professionals such as physicians and real estate brokers against liability incurred as a result of errors and omissions in performing professional services

Reinstatement: Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying and past-due premiums required

Surplus Lines Insurance: Insurance written by insurers not licensed in the states where the risks are located and placed with such insurers under the surplus line laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence reported before some predetermined future date (‘sunset’)

Term Insurance: Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to twenty years, because such periods usually cover the needs for temporary protection

Underinsured Motorists Coverage: Proved coverage for bodily injury, and in some states property damage, for losses incurred by an insured when an accident is caused by a motorist who does not have sufficient insurance limits

Universal Life: An interest-sensitive life insurance policy that builds cash values. The premium payer has control over how the policy is structured. He has the flexibility to eliminate the premiums (essentially pay up the policy and pay no more premiums) or have the premiums continue for life. It is a matter of juggling three variables: the assumed interest rate, the cash value and the premium payment plan. The policy is interest-sensitive, and if interest rates change from the assumed interest, it will affect the other two variables. In the past, many Universal Life Policies were structured assuming a higher interest rate than was actually received, therefore, most of them have under performed. If you have a Universal Life Policy, you should have it evaluated to see if it needs to have the premiums adjusted to get it back on track. A fourth variable that has not been a factor but could be in the future, and the owner should be aware of, is the Mortality variable. Universal Life policies are usually structured assuming current mortality rates. The insurance companies reserve the right to change those rates.

Uninsured Motorist Coverage: Provides coverage for bodily injury, and in some states property damage, for losses incurred by an insured when an accident is caused by a motorist who is not insured

Whole Life Insurance: Life insurance that is kept in force for a person’s whole life as long as the scheduled premiums of maintained. All Whole Life policies build up cash values. Most Whole Life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a Whole Life policy is the dividend which could vary depending on how well the insurance is doing. If the company is doing well and the policies are not experiencing a higher mortality than projected, premiums are paid back to the policy holder in the form of dividends. Policyholders can use the cash from dividends in many ways. The three main uses are: it can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term Insurance Net

Worker’s Compensation: Protection which provides benefits to employees for injury or contracted disease arising out of and in the course of employment. Most states have laws which require such protection for workers and prescribe the length and amount of such benefits provided