Insurance Talk

A glossary of insurance terms.

Commercial Insurance Terms

Accounts Receivable Insurance

Coverage that protects businesses against their inability to collect their accounts receivable because of the loss of supporting records that have been destroyed by a covered cause of loss. Also covered are the extra collection expenses that are incurred because of such loss or damage and other reasonable expenses incurred to re-establish records of accounts receivable after loss or damage.

Bailees Liability Coverage

Normally, this is an inland marine insurance, despite the title. This type of coverage is designed for a bailee to provide coverage for liability for the property of customers, in that bailee’s care, custody or control. Although this coverage was designed to cover the bailee’s liability exposure, it can often be endorsed or have options exist to provide a no-fault coverage to protect the customer’s property against any damage, whether or not there is negligence and subsequent liability

BOP – businessowners policy

Similar to the commercial package policy (CPP), it provides broad property and liability protection in a single contract and is designed for small and medium-sized mercantile, service, office or apartment risks.

BPP (Equipment and Inventory Limit)

Business personal property includes, but is not limited to: inventory, furniture, supplies, equipment, phone systems, computers, other machinery, and property of others in your care at your business location.

Building Limit

This coverage provides protection against covered losses or damages to the commercial building you own or are required to insure.

Business Auto Policy

Coverage designed to provide a “standard” form for insuring commercial vehicles (other than private passenger cars).

Business Income

A coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. Extra expenses incurred to continue operations at another location are included as long as they reduce the total amount of loss.

Business Liability

Provides protection for your company in the event that you cause certain injury to others. This could include injury or damage to a person or property. It does not include professional liability for your errors or omissions.

Collision Coverage

Collision covers physical damage to your vehicle that occurs in an accident with another vehicle.

Comprehensive Coverage

Comprehensive covers physical damage to your vehicle that occurs from causes other than a collision.

Contents/Equipment Used Off Site

This insurance provides coverage for your insured business personal property and equipment while being used away from the insured location.

Deductible

In a policy providing a deductible clause, this is the amount which must first be subtracted from the total damage incurred before determining the insurance company’s liability. The deductible may be in the form of an amount of dollars, a percent of the loss, a percent of the value of the insured property, or a period of time, as in health insurance.

Equipment Breakdown Coverage

Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.

Employee Benefit Plans Liability

Protects the insured employer against any claims made against him or her by employees or former employees caused by a negligent act, error or omission in the administration of the insured’s employee benefit programs. Exposures such as providing incorrect advice concerning an employee’s pension plan or failure to enroll employees under a benefit program are covered under this insurance. The coverage is provided either under a separate policy or as an endorsement to the employer’s general liability policy.

Employee Dishonesty

This insurance provides coverage for any financial losses to your business resulting from acts of dishonesty by employees during the course of their employment by you.

Employer’s liability

Employers Liability Insurance Coverage protects you (the employer) in the event that you are sued by a third party for injuries to your employee. These third parties could include the spouse or children of an injured employee. As with any liability claim negligence must be proved

Employment Practices Liability

This insurance provides coverage for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts.

Errors and Omissions Insurance

1) A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others.
2) A form of coverage for financial institutions protecting against loss to lending institutions which fail to effect insurance coverage.

Fidelity Bond

This is an insurance policy which reimburses an employer for losses resulting from dishonest acts of employees. May be written to cover specific employees or all employees, using either a schedule or blanket basis, or by scheduling positions versus named persons.

Hired Auto Liability

Hired auto liability covers your for your liability to others that occurs because of an accident involving a vehicle you’ve rented or borrowed.

Automobile Liability

Liability coverage provides protection for your liability to third parties in event of an accident or occurrence for which you are held legally liable. This coverage is required for vehicle owners by financial responsibility laws.

Medical Payments Insurance

This coverage pays the cost of medical care to an injured party regardless of whether the policyholder is liable. It is written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.

Motor Truck Cargo

This inland marine form indemnifies an owner or operator of a motor truck, on which is carried property of others, against what the owner or operator may become liable to pay to the owners of the property carried as the result of loss or damage occurring while transporting the property. The Interstate Commerce Commission (as well as the laws of many states) requires a common carrier to have such insurance before being licensed.

Non-Owned Auto Liability

Non-owned auto liability covers you for your liability to others that occurs because of an accident involving a vehicle you do not own or rent.

Ordinance or Law Coverage

A property endorsement that provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire. These ordinance or law damages are normally excluded in standard property coverage forms. The coverages available in this endorsement are cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.

Peak Season Endorsement

This is a property endorsement that allows an insured to purchase additional property damage insurance for specified cyclical periods occurring on a regular basis. The insured purchases an underlying limit that remains constant throughout the entire year. Additional limits are purchased to increase the underlying limits for specified periods of time. Both the amounts and the dates of the increase are indicated in the endorsement. This type of endorsement provides protection for risks that are seasonal or have significantly higher inventories at set times each year, such as the holidays.

Personal Injury Protection

Also called “no fault” coverage, this is designed to respond to medical bills incurred by you, without regard to who was at fault in an accident.

Professional Liability

A class of insurance policies that indemnifies the insured for third-party liability claims due to negligence in the performance of professional services. Professionals include doctors, lawyers, engineers, insurance agents and others.

Property Deductible

Insurance coverage does not apply until the amount of a loss exceeds the value that has been selected as a deductible.

Sewer or Drain Back-up

This insurance covers damage caused by water that backs up, overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment as a result of a covered cause of loss.

Surety Bond

This is a written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include payment of debts and responsibility for defaults.

Temperature Change

Covers loss caused by the spoilage of perishable products. The limit may not exceed the limit you have selected for your equipment and inventory.

Umbrella

This type of insurance supplements your existing General Liability and Business Property and Commercial Auto policies to cover certain catastrophic liability claims.

Underinsured Motorist

Underinsured Motorist Coverage protects you from costs you incur that are caused by another driver who carries limits of liability insurance that are insufficient to cover your costs arising from an accident.

Uninsured Motorist

Uninsured Motorist Coverage pays for damages to you and your vehicles when the accident is caused by someone else who doesn’t have insurance or when you don’t know who caused the accident (such as a hit-and-run).

Valuable Papers

This insurance provides coverage for replacement of a commercial operation’s valuable papers, records and forms including electronic media. Typically, coverage is limited to the cost of recreating or restoring the lost or damaged documentation.

Workers’ Compensation

Workers’ Compensation insurance protects employees by providing medical and income benefits for job-related injuries or illnesses. The limits and benefit levels vary by individual state statutes. In most states worker’s Compensation insurance is required by law if a business has regular employees.

Personal Insurance Terms

Homeowners

Coverage forms

HO-1

A package of basic homeowners insurance that covers a number of specified causes of direct loss to a residence and personal property as well as liability insurance.

HO-2

A package of basic homeowners insurance that covers a number of specified causes of direct loss to a residence and personal property as well as liability insurance. It responds to several more causes of loss than an HO-1 form.

HO-3

A broad package of homeowners insurance that, with exception of earthquake, flood, military and nuclear activity, covers all of direct loss to a residence that is not specifically excluded. It also provides personal property protection on a specified cause basis, as well as liability insurance.

HO-4

A package of basic homeowners insurance that covers a number of specified causes of direct loss to personal property as well as liability insurance. It responds similarly to an HO-2 form and is designed for tenants.

HO-5

A broad package of homeowners insurance that, with exception for earthquake, flood, military and nuclear activity, covers all of direct loss to a residence that is not specifically excluded. It also provides personal property protection on a specified cause basis, as well as liability insurance. It is broader than an HO-3 as it settles all eligible property losses on a replacement cost basis.

HO-6

A package of basic homeowners insurance that covers a number of specified causes of direct loss to certain types of structural and personal property as well as liability insurance. It also provides some coverage for structural property that is under joint ownership and limited coverage for property loss assessments. It responds similarly to an HO-2 form and is designed for condominium owners.

Homeowner Coverages

Coverage A- Dwelling

Coverage B- Other Structures (10% of Coverage A)

Coverage C- Personal Property (50% of Coverage A)

Coverage D- Loss of Use (20% of Coverage A)

Coverage E- Liability

Coverage F- Medical Pay

Personal Articles

This policy provides worldwide coverage on an “all-risk” basis for scheduled, valuable personal property.

Deductible

In a policy providing a deductible clause, this is the amount which must first be subtracted from the total damage incurred before determining the insurance company’s liability.

Personal Auto

Personal Auto Policy

Coverage designed as the “standard” form for insuring private passenger autos and certain types of nonbusiness trucks. Coverage includes Liability, Physical Damage, Uninsured and Underinsured Motorist, Medical Payments and No-Fault coverage if required by law.

Bodily Injury Liability insurance

This is a form of “third-party” protection covering the insured’s legal liability for bodily injury to others caused by the insured’s negligence.

Property Damage Liability insurance

This is a form of “third-party” protection covering the insured’s legal liability for damage to property of others caused by the insured’s negligence.

Medical Payments Insurance

Protection is provided to pay the cost of medical care to an injured party regardless of whether the policyholder is liable. It may be written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.

Personal Injury Protection (PIP)

Also known as no-fault insurance, PIP provides insurance for medical costs, loss of earnings, additional living expenses, and funeral costs for occupants of the insured automobile and pedestrians other than those insured under other policies.

Uninsured Motorists Coverage

Under an auto policy, protection for the insured against bodily injury or property damage (in some states) caused by the negligence of an uninsured or underinsured motorist

Underinsured Motorists Coverage

Coverage an insured may purchase to protect his or her own self from damage or injury caused by a negligent party who does not have adequate limits of insurance to cover the loss.

Collision Coverage

Collision covers physical damage to your vehicle that occurs in an accident with another vehicle.

Comprehensive Coverage

Comprehensive covers physical damage to your vehicle that occurs from causes other than a collision.

Personal Umbrella Liability insurance

A form of liability insurance protecting policyholders for claims in excess of the limits of their primary personal automobile, residential liability and recreational (boat, RV, motorcycle, etc.) liability policies. It also provides coverage for some sources of loss that are not covered by their primary policies. Such cases are subject to a deductible (or self-insured retention).