Frequently Asked Questions

Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old sofa will not be replaced at current full value because of a decade of depreciation.

Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.

When the agreed value option is used, the coinsurance requirement is removed and the insurer agrees to cover losses for its agreed value. As an example, the insured has property insured for $100,000 and the agreed value is also $100,000, if a loss occurs, any loss up to $100,000 is covered 100%. When this option is used, the insured and the insurance company agree on the value of the property before the policy is issued. This option is usually assigned to one-of-a-kind property.

The liability coverage of the personal auto policy provides protection against legal liability arising out of the ownership or operation of an automobile. The insuring agreement agrees to pay damages for bodily injury or property damage for which the insured is legally responsible because of an automobile accident. The liability limit can be written as a single limit that applies to both bodily injury and property damage. The policy can also be written with split limits in which the limits of insurance for bodily injury and property damage are stated separately. The insuring agreement also states that in addition to the payment of damages for which the insured is legally liable, the insurer also agrees to defend the insured for all legal defense costs. The defense cost is in addition to the policy limits.

Covers direct damage to covered property when caused by a covered cause of loss. Covered property is any property that is owned by the named insured or is in the named insured's care, custody, or control and for which the named insured is legally liable. A covered cause of loss is a sudden and accidental breakdown of the insured's boiler and machinery equipment or any part of the equipment described in the policy. Boiler and machinery insurance is necessary because commercial property policies exclude explosion of steam boilers and breakdown of machinery. The standard boiler and machinery policy contains three extensions of coverage. The three extensions are: 1) expediting expense coverage, which pays the reasonable extra cost incurred to expedite progress after a loss, 2) Automatic Coverage which covers accidents to objects at newly acquired locations for up to ninety days after the named insured acquires the property, and 3) Defense Cost and Supplemental Payments which would apply when the insurer is defending the insured against claims or suits alleging liability for damage to property of others. Defense cost and supplementary payments are payable in addition to the policy limit. Expediting expenses are included in, and not in addition to, policy limits. In addition to the three extensions the policy has four interior limits of $5,000 each, for 1) the cost of cleanup, repair or replacement, or disposal.

Coverage for the building includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured's premises is also insured.

Property owned by the insured and used in the insured's business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designed to protect the insured against loss or damage to the personal property of others while in the insured's care, custody or control.

Liability or loss resulting from an accident.

That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.

The term peril is used when discussing losses. A peril is a cause of loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies, often referred to as the broad form policy, add coverages for water damage, weight of snow, ice or sleet, breakage of glass and coverage for falling objects. The broadest coverage is the special form, which is best known as the all risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form.

A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

Most building and business personal property policies have a coinsurance clause that requires the insured to carry insurance equal to at least a specified percentage of the actual cash value of the property. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured.

Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.

Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.

Computer fraud is a specialized kind of theft in which a computer is used to steal property from its rightful owner. This form covers money and securities and property other than money and securities.

Amount of loss that the insured pays before the insurance kicks in.

The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

Employee dishonesty is considered to be a criminal act committed by an employee acting alone or in collusion with others. There must be intent by the employee to cause the employer a loss and to obtain a financial benefit for the employee or someone else. Coverage is provided for dishonest acts of employees of the named insured only. Coverage insures against loss of money, securities, and property other than money and securities. The blanket form provides coverage for dishonest acts of all employees. The limit for blanket coverage applies per loss, regardless of how many employees are involved. The scheduled form provides coverage only for the dishonest acts of employees specifically listed in the policy. On the scheduled form, a separate limit applies to each employee listed on the schedule.

This coverage protects employers for their legal liability for bodily injury by accident or disease to an employee arising out of and in the course of the employee's employment when not covered under the workers compensation law. Before benefits are paid under this coverage, the employee must prove the employer is liable for the injury. 1.Bodily Injury By Accident This amount is the most an insurer will pay under Coverage (B) for all claims arising from any one accident, regardless of how many employees are involved in the accident. The standard limit is $100,000 for any one accident, which can be increased. 2.Bodily Injury By Disease (Policy Limit)This is the aggregate limit the insurer will pay under Coverage (B) for all claims sustaining bodily injury by disease during the policy period. The standard policy limit is $500,000, which can be increased. 3.Bodily Injury By Disease (Each Employee)This amount is the most an insurer will pay under Coverage (B) for damages due to bodily injury by disease to any one employee. The standard limit of liability for each employee is $100.000, which can be increased.

Items or conditions that are not covered by the general insurance contract.

This is a factor that deals with the rating of the policy. The Experience Modification figure is based on the insured's loss experience. The factor is used to increase or decrease the manual rates of insurance.

Measure of vulnerability to loss, usually expressed in dollars or units.

This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.

Extortion is the surrender of property away from the premises as a result of a threat of bodily harm to someone who is, or allegedly is being held captive. This form covers money and securities and property other than money and securities.

A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewelry or sports equipment.

Forgery is generating a document or signature that is not genuine. Alteration is changing a document in a manner that is neither authorized nor intended. This form insures against loss caused by the forgery or alteration of a covered item drawn against the insured's accounts. A covered item might be a check, draft, promissory note, bill of exchange or similar instrument.

Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.

A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.

Coverage is provided only for autos leased, hired, rented or borrowed for use in the named insured's business.

Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from one percent of a home's insured value to 15 percent, depending on many factors that differ by state and insurer.

Restoration to the victim of a loss by payment, repair or replacement.

An insured can insure a building for its full value at the beginning of the policy year, but at the end of the year, it might not be covered for its full value. This problem can be corrected by adding inflation guard coverage. With inflation guard, the policy limit increases gradually during the policy term so that the total increase amounts to the desired percentage increase at the end of the policy term.

Inland Marine Insurance provides coverage for goods in domestic transit, goods of bailees/customers, moveable equipment, and unusual property. Property of certain dealers and instrumentalities of communication and transportation are also covered. In short, inland marine insurance provides coverage for loss exposures that cannot be conveniently or reasonably confined to a fixed location. A bailee is any person or business that accepts the property of others for a specific purpose. Instrumentalities of communication and transportation are properties essential to communication or transportation. Properties that may come under this class are radio and television equipment, bridges, roads, tunnels, pipelines and piers. There are many kinds of inland marine policies that cover several kinds of loss exposures. The insurance industry has recognized this diversity by dividing inland marine into two categories; filed and non-filed. Filed policies are those for which the policy forms and rates are filed with the state insurance department. These policies are characterized by the number of potential insureds with the same kinds of similar loss exposures. Most filed forms cover risks of direct physical loss to the covered property. The following are some examples of inland marine filed policy forms: commercial articles coverage form, equipment dealers coverage form, signs coverage form, mail coverage form, accounts receivable coverage form, and the valuable papers/records coverage form.

Interest in property such that loss or destruction of the property could cause a financial loss.

Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.

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.

The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company's underlying profitability, or loss experience, on its total book of business.

The insuring agreement states that the insurer will pay all reasonable and necessary medical and funeral expenses incurred by an insured because of bodily injury caused by an accident. Payment can be made for expenses incurred within three years from the date of the accident. The insured is the named insured and family members, and any other person injured while occupying a covered auto. Pedestrians or cyclists are also considered the insured when struck by a vehicle. These payments are made without regard to fault.

Perils specifically covered on insured property.

Coverage is provided only for autos not owned, leased, hired, or borrowed by the named insured. Coverage includes autos owned by the insured's employees or members of their households, but only while used in the named insured's business or personal affairs.

An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure, which results in bodily injury or property damage neither, expected not intended by the insured.

The cause of a possible loss.

This is an endorsement that adds No-Fault benefits. No-Fault means that in the event of an automobile accident, each party collects from his or her own insurer regardless of fault. No-Fault benefits are limited to the injured person's actual economic loss, and are paid as specified by the law of the insured's state. Payment could be made for such losses as loss of earnings resulting from bodily injury and medical and funeral expenses. Other expenses can also be considered. The PIP endorsement is only available in certain states with No-Fault Laws. The endorsement applies only to bodily injury and not to property damage (the state of Michigan is the exception to property damage). No-Fault Laws vary widely from state to state.

The price of insurance protection for a specified risk for a specified period of time.

The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

The business auto policy provides a coverage extension if an auto is insured for comprehensive or specified cause of loss coverage which insures against loss of use of a covered auto only if the auto is a private passenger type auto and is stolen. The coverage extension pays up to a daily limit of $10 and a maximum limit of $300. Payments begin forty-eight hours after the theft and ends when the insured auto is returned or when the insurer has paid the insured for the auto. For broader coverage the insured can pay an additional premium for rental reimbursement coverage. Rental reimbursement pays the cost of renting a substitute auto for replacement of any covered auto that has suffered a covered loss. The daily and maximum limit for this coverage varies among insurers.

The self-insured retention is the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self-insured retention would only apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.

This provides coverage against loss from fire, lightning, or explosion; theft; windstorm, hail, or earthquake; flood; mischief or vandalism; and sinking, burning, collision or derailment of a conveyance transporting the covered auto.

The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.

Theft means any act of stealing. Disappearance is unknown causes of loss. Disappearance lacks the elements of knowing if the crime was a theft, burglary or robbery. Destruction is the loss of certain property, it is usually the result of another cause of loss. Section (1) of the form covers money and securities against loss by theft, disappearance, or destruction inside the premises. Section (2) covers money and securities outside the premises in care and custody of a manager.

A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.

A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.

Umbrella liability insurance provides excess liability coverage over several of the insured's primary liability policies. Most umbrella liability policies provide coverage that is broader than the insured's primary policies. An excess liability policy may be what is called a following form policy, which is subject to the same terms as the underlying policies. It may be a self-contained policy, which means it is subject to its own terms only, or it may be a combination of these two types of excess policies. Umbrella policies have three functions: (1) To provide additional limits above the Each Occurrence limit of the insured's primary policies, (2) To take the place of primary insurance when primary aggregate limits are reduced or exhausted, and(3) To provide broader coverage for some claims that would not be covered by the insured's primary insurance policies, which would be subject to the policy retention. Most umbrella liability policies have one comprehensive insuring agreement. The agreement usually states it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, personal injury, and advertising injury.

This insuring agreement pays for bodily injury to an insured who is injured y an uninsured motorist, a hit-and-run driver, or a driver whose insurer becomes insolvent. Some states offer coverage for property damage as part of the uninsured motorist coverage. Usually when property damage is added a deductible would apply.

Coverage applies when a negligent driver has liability limits at the time of an accident, but the liability limits carried may be insufficient to pay the damages for which the negligent driver is responsible. This is when the insured's Underinsured Motorist Coverage would apply and payment for the difference could be made. The two coverages are mutually exclusive and do not overlap or duplicate each other. An insured can collect under one coverage or the other depending on the situation, but not under both.

A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.

This coverage agreement obligates the insurer to pay all compensation and other benefits required of the insured by the workers compensation law or occupational disease law of any state listed in the policy. The coverage applies to bodily injury by accident and by disease. Coverage (A) shows no dollar limit for the benefits provided since any applicable limits would be those established within the law. Benefits under Coverage (A) are paid to the employee without regard to fault.