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Frequently Used Terms & Definitions . .
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ACCIDENT -
An unexpected fortuitous event, unforeseen and unintended, not
under the control of an insured and resulting in a loss.
ACT OF GOD
- A flood, earthquake or other accident or event that is without
any human intervention and that could not have been prevented by
reasonable care or foresight, but is the result of natural
causes. (A snowstorm is an Act of God; driving in a snowstorm is
an act of man.)
ACTUAL CASH
VALUE - The sum of money required to pay for damages or lost
property, computed on the basis of replacement value less its
depreciation by obsolescence or general wear.
ADJUSTER -
An individual representing the insurance company and acting for
the company in working on agreements as to the amount of loss
and the liability of the company in same.
AGENTS -
Two types of agents sell insurance: (1) Independent Agents are
self-employed business people who typically represent more than
one insurance company and are paid on a commission basis; and
(2) Exclusive Agents represent only one insurance company and
may be salaried or work on a commission basis.
CLAIM - (1)
A formal request for payment of a loss under an insurance
contract or bond; (2) The actual amount of the final settlement.
CLAIMANT -
One who seeks reimbursement for loss under the terms and
conditions of the insurance contract.
CONTRIBUTION
- The term relates to circumstances where more than one
party covers the risk. Each party is deemed to be liable for his
proportion of the loss. If the Assured recovers in full from one
insurer, that insurer is entitled to recover from the other
insurer for that part of the loss which should have been paid by
the latter.
DECLARATION
PAGE - That page of the insurance policy which lists the
insurance company, its addresses, name of the policyholder,
starting and ending dates of coverage, and the actual coverages
given in the contract, including the locations and amounts.
DEDUCTIBLE
- The amount of loss paid by the policyholder before the
insurance policy benefits become payable.
GOOD FAITH
- A basic principle of insurance. The Assured and his broker
must disclose and truly represent every material circumstance to
the Underwriter before acceptance of the risk. A breach of good
faith entitles the Underwriter to avoid the contract. (Proposed
changes in law may affect this definition.)
HOLD-HARMLESS
AGREEMENT - A contractual arrangement whereby one party
assumes the liability inherent in a situation, thereby relieving
the other party of responsibility. Such agreements are typically
found in contracts like leases. A typical lease may provide that
the lessee must "hold harmless" the lessors for any liability
from accidents arising out of the premises.
INSURED -
The person whose risk is transferred and shared; the party to an
insurance agreement whom the insurer agrees to indemnify for
losses, provide benefits for, or render services to.
INSURER -
The company or group offering protection through the sale of an
insurance policy to an insured; the party to an insurance
agreement who undertakes to indemnify for losses, provide
pecuniary benefits, or render services.
LIABILITY
INSURANCE - That insurance that pays and renders service on
behalf of an insured for loss arising out of his responsibility,
due to negligence, to others imposed by law or assumed by
contract.
LIABILITY
LIMITS - The sum or sums beyond which a liability insurance
company does not protect the insured on a liability policy.
LIEN - A
word that indicates an encumbrance on property, either for
discharge of a duty or the payment of a debt. When a lien
exists, the conditions attaching to the issue of an insurance
contract require that it be disclosed to the insurance company.
PERSONAL INJURY
PROTECTION - The formal name usually given to no-fault
benefits in states that have enacted mandatory or optional
no-fault automobile insurance coverages. PIP usually includes
benefits for medical expenses, loss of work income, essential
services, accidental death and funeral expenses.
PROOF OF LOSS
- A statement made to the insurance company under oath setting
out the basis of an insured's claim under the insurance policy.
PROXIMATE CAUSE
- The immediate and effective cause of loss or damage. It is
an unbroken chain of cause and effect between the occurrence of
an insured peril or a negligent act and resulting injury or
damage.
SUBROGATION
- The legal process by which an insurance company seeks from
a third party who may have caused the loss, recovery of the
amount paid to the insured.
UNINSURED
MOTORIST COVERAGE - Endorsement to a personal automobile
policy that covers an insured involved in a collision with a
driver who does not have liability insurance. |
