Glossary

Standard Insurance Definitions

ACTUAL CASH VALUE
The current cost of replacing an article with a similar one in the same condition. Any item has three basic values: original cost, actual cash value, and replacement value. For example, if you originally paid $400 for your living room couch; its actual cash value might be $175. But if it’s destroyed in a fire, replacing it will cost you $800.
ADJUSTER
A person who investigates a loss and negotiates settlement with the claimant on the insurance company’s behalf.
APPLICATION (APP)
A form on which the prospective insured states facts requested by the insurance company and on the basis of which (together with any information from other sources) the insurance company decides whether or not to accept the risk, modify the coverage offered, or decline the risk.
BINDER
A temporary or preliminary agreement, which provides coverage until a policy can be written or delivered.
BROKER
An independent person or firm who acts on behalf of the insured in placing business with the insurance company. Responsible for the collection of premiums but having no authority to give coverage on the insurance company’s behalf without their specific agreement. Compensation is on a commission basis.
DEDUCTIBLE
The portion of a loss that you are required to pay before your insurance coverage will respond. Deductibles can be used to reduce your physical damage premiums. For example, if you owned a policy with a $200 deductible and you suffered a covered loss totaling $1,000, you would pay the first $200 and the insurance company would pay the remaining $800. If the loss were only $200, you would pay the entire amount and the insurance company would pay nothing.
DIRECT WRITER
An insurance company, which sells its policies through salaried employees (licensed agents) who represent it exclusively, rather than through independent local brokers, who represent several insurance companies.
GRACE PERIOD
A period after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.
INDEMNIFY
To restore the victim of a loss, in whole or in part, by payment, repair, or replacement.
MATERIAL MISREPRESENTATION
The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.
NEGLIGENCE
Failure to use that degree of care, which an ordinary person of reasonable prudence would use under the given circumstances.
PREFERRED RISK
An insurance classification indicating a risk that is superior to the average risk on which the rate has been calculated and thus eligible for a reduced rate.
PREMIUM
The amount of money an insurance company charges for insurance coverage.
RENEWAL
The continuation in full force and effect of something that is about to expire. With an insurance policy it is made either by the issuance of a new policy or renewal receipt or certificate, to take effect upon the expiration of the old policy.
SUBROGATION
The right of an insurance company to step into the shoes of the party whom they compensate and sue any party whom the compensated party could have sued.
UMBRELLA LIABILITY POLICY
A policy that pays for liability losses in excess of those covered in homeowners and auto insurance. Also, commonly used in commercial insurance.
UNDERWRITER
A person trained in evaluating risks and determining the rates and coverages that will be used for them.

Auto Insurance Definitions

ADDITIONAL INTEREST INSURED
Another person or company who may be liable for an accident involving an insured or an insured vehicle and who has been named as an Additional Interest Insured under the policy.
AVOIDANCE OF RISK
Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure.
BODILY INJURY LIABILTY
Pays when an insured person is legally liable for bodily injury or death caused by your vehicle or your operation of most non-owned vehicles. This coverage also pays for your legal defense if you are sued.
CIVIL LIABILITY
Liability to other motorists, pedestrians and property owners that you assume when operating your automobile on a public roadway. - See more at: https://surexdirect.com/auto-insurance-glossary#sthash.yrxevCoX.dpuf
FAIR MARKET VALUE
The price that a willing buyer would pay a willing seller, neither being under any compulsion to sell or buy.
GARAGING LOCATION
The postal code where your vehicle is parked or garaged when not in use. This is usually your primary residence.
LIABILITY, COLLISION and COMPREHENSIVE
These are the three main types of coverage available in an auto insurance policy. Liability pays other people if you've injured them or damaged their property. Collision pays to repair damage to your car caused by collisions. Comprehensive pays you for your losses due to theft and other calamities that are unrelated to collisions – for example, damage from hail, fire, vandalism, floods, etc.
LIABILITY LIMITS
The sum or sums beyond which a liability insurance company does not protect the insured on a particular policy.
OCCASIONAL DRIVER
The person who is not the primary or principal driver of the vehicle.
PERIL
Cause of a possible loss. For example, fire, theft, or hail.
PRINCIPAL DRIVER
The person who drives the insured car most often.
PROOF OF LOSS
A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy.
SPECIFIED PERILS
An optional coverage designed to provide basic protection for your vehicle for loss or damage resulting from incidents specifically stated in your policy. A few examples of the types of losses insured under named perils coverage include fire, lightning, theft, explosion, earthquake, windstorm and hail.

Home Insurance Definitions

APPRAISAL
A valuation of property made for determining its insurable value or the amount of loss sustained.
ARSON
The willful and malicious burning of property.
BROAD FORM
Any of the commercial or personal lines property forms which provides coverage on name perils bases. This form normally adds the Extended Coverage and Vandalism and Malicious Mischief coverages. This form is generally used for coverages on a Homeowners Policy.
BURLARY
Unlawful removal of property from premises involving visible forcible entry.
CONSEQUENTIAL DAMAGE
A loss, which is an indirect result of an accident or fire, e.g. food spoiled through breakdown of a refrigerator.
DIRECT LOSS (OR DAMAGE)
A loss, which is a direct consequence of a particular peril. Fire damage to a refrigerator would be a direct loss. Spoiling of food in the refrigerator as a result of the fire damage would be an indirect loss.
IMPROVEMENTS AND BETTERMENTS
Additions or changes made by a lessee at his own cost to a building that he is occupying, which enhance its value. These become part of the realty and require special insurance consideration.
MORALE HAZARD
An attitude that increases the probability of loss from a peril. The attitude of, "It's insured; so why worry?" is an example of a morale hazard. Intended to pay off the balance due on a mortgage or meet the payments on a mortgage as they fall due upon or after the death or disabilityMORTGAGE INSURANCE POLICY - In life and health insurance, a policy the benefits from which are of the insured.
MORTGAGEE
The creditor to whom a mortgage is given and who lends money on the security of the value of the property mortgaged.
MORTGAGOR
The debtor who receives money and in turn grants a mortgage on his property as security for a loan.
PERSONAL ARTICLES FLOATER
Provides all risk coverage, subject to reasonable exclusions for valuable items such as furs, jewellery, cameras, silverware, etc. formerly insured under separate contracts. The items are generally listed by description and value. This can be contrasted to the personal effects floater.
PERSONAL PROPERTY LIMITATIONS
Don't assume everything you own is adequately insured by a standard homeowner's policy. The typical homeowner's policy provides only limited coverage for many expensive items. Extra coverage can be purchased separately.
PRIMARY RESIDENCE
The place where you will reside for the majority of your policy term.
TENANTS POLICY
A policy form, which is specifically designed for people who rent, to insure their personal belongings.