Glossary of Insurance Terms...
A thru D

RPM was established over a century ago with the idea that buying insurance doesn't have to be frustrating, complicated or expensive.

Below is a glossary of insurance terms to help you navigate some of the insurance jargon. The information presented may not apply or may not included in your specific insurance policy. Please contact us or your insurance carrier to verify coverage provided on your specific insurance policy or policies you are contemplating purchasing.

Entries Under "A"

Abandonment - A term that applies to property and signifies both a relinquishing of it and the letting go of all legal rights to it, as well, with the intent to claim a total loss. Abandonment of property to an insurance company is something insureds are expressly prohibited from doing in most property polices.

Abandonment clause - A property policy provision that stipulates that the insurer need not accept any damaged property that the insured chooses to relinquish.

Absolute liability - The performance of an act so dangerous as to be sufficient to trigger liability regardless of the degree of negligence. Triggering explosives is often used as an example. Sending workers aloft for construction or repair at elevated heights is another. ``Strict liability'' is another term that is sometimes used.

Accident - An unforeseen, unintended, and unexpected event, which occurs suddenly and at a definite place. See Occurrence.

Accident frequency - The rate of occurrence of accidents. Along with accident severity, it is taken into account in ratemaking.

Accident severity - The measure of the seriousness of a claim, measured in, for example, dollars. Along with frequency, it is taken into account in ratemaking.

Accident year experience - Measures premiums and losses relating to accidents which occurred during a 12-month period.

Accommodation line - Normally unacceptable risks that are written as an ``accommodation'' to an agent or broker who has an overall profitable relationship with the insurer. For example: a personal auto risk with a teenage driver of a sports car might be written if the other lines of insurance which it carries for the customer were profitable; or if the agency has had a good and profitable relationship with the insurer.

Account current - A monthly statement provided by an insurer detailing an agent's premiums, commissions, cancellations, and endorsements.

Account selling - Account selling is trying to handle all of a client's insurance needs, rather than providing for only a portion of those needs.

Accounts receivable insurance - Pays for the cost of reconstructing accounts receivable records that have been damaged or destroyed by a covered peril. Even more important, it covers any payments that cannot be collected because records cannot be reconstructed.

Acquisition cost - The expense undertaken to acquire new business. The concept applies to both agents and companies. The largest portion of an insurer's acquisition cost is agent's or sales representative's commission or bonus.

Act of God - Acts of nature ? the term was once widely used to distinguish between man-made events, i.e., fire, collision, and nature's rampages in wind and flood.

Active malfunction - In products insurance, a defect or malfunction in a product that damages the property of the user.

Actual cash value (ACV) - A method for placing value on property as of the time of its loss or damage. ACV may be determined as replacement cost, new, less depreciation. The market value of an item may be used to help determine actual cash value. Contrast with replacement cost.

Actual cash value appraisal - An appraisal to determine the actual cash value of a building and related personal property.

Actuary - A person highly trained in mathematics and statistics who calculates rates and dividends, and provides other statistical information for an insurance company.

Additional insured - One who qualifies as ``insured'' under the terms of a policy even though not named as insured. Officers of a corporation may be included as insureds under the terms of a policy written in the name of the corporation.

Additional living expense insurance - This coverage, found in homeowners forms, provides payment for extra expenses made necessary by the insured's inability to reside in the insured dwelling because of a covered loss -- for example, restaurant meals and hotel bills. The amount payable is the difference between normal household expenses and the increase.

Adhesion contract - A standardized set of agreements offered by one (usually the stronger) party to another on a ``take it or leave it'' basis. An insurance policy is an example of such a contract. The insurer offers a personal auto policy, for example, that an individual may ``adhere to'' (or not) but in any case the individual may not change any of its terms. Because it has the stronger position, the insurance company has the burden to spell out its terms precisely. Such contracts are interpreted strictly against the author of the contract. Not to be confused with aleatory contract.

Adjuster - A person who may act either on behalf of the insurance company or the insured in settling a claim. Employee adjusters work for an insurer; independent adjusters represent the insurance company on a fee basis; and public adjusters represent the insured on a fee basis.

Admitted assets - The highly liquid assets of an insurer permitted by the state to be taken into account when reporting financial condition.

Admitted company - An insurance company that is licensed (admitted) to conduct business within a given state.

Admitted market - The range of insurance available through admitted companies.

Advance premium - Also called ``deposit premium,'' an advance premium is a downpayment on what will be the final premium, in policies where the final premium is subject to audit.

Adverse selection - The tendency of poorer than average risks to buy and maintain insurance. Adverse selection occurs when insureds select only those coverages that are most likely to have losses.

Adverse underwriting decision - Any decision made by an underwriter that is not favorable to the insured. Such decisions involve termination, declination, higher rates, or reduction in coverage. Another example is the placing of a risk in a residual market or with an unauthorized insurer.

Advertising injury - Claim arising out of slander, libel, copyright infringement, or misappropriation of advertising ideas. Coverage is provided as part of coverage B of the commercial general liability policy.

Affinity marketing - Targeting marketing efforts toward one group or category of client. Examples include: grocery stores; all the employees of one company; or employees in one industry. Group business is a type of affinity marketing.

Agency company - An insurance company that produces business through an agency network. See direct writer.

Agency contract - The legal agreement between an insurance agency and the insurer detailing the terms of representation.

Agency plant - The total force of agents representing an insurer.

Agent - One who solicits, negotiates or effects contracts of insurance on behalf of an insurer. His right to exercise various functions, his authority, and his obligations and the obligations of the insurer to the agent are subject to the terms of the agency contract with the insurer, to statutory law, and to common law.

Agent’s appointment - The act by an insurer that grants an agent the authority to act as an agent for the insurer. In most states, agents must be licensed and appointed, prior to being allowed to sell insurance.

Agent’s authority - The authority of an insurance agent to act on behalf of the insurer he or she represents. There are several types including: express authority (authority to act on specific instructions only); implied authority (actions taken in accordance with prevailing custom); or apparent authority (actions based on appearances created by the agent and acquiesced to by the principal).

Agents errors and omissions insurance - Insurance obtained by the insurance agent to guard against loss caused by an unintentional failure to properly insure (or recommend insurance to) a client.

Agent’s license - A certificate of authority from the state that permits the agent to conduct business.

Aggregate deductible - A deductible provision in some property insurance contracts where all covered losses during a year are figured together and an insurer pays only when the aggregate deductible amount is exceeded.

Aggregate excess reinsurance - A type of excess reinsurance treaty that sometimes is called stop loss or excess of loss ratio reinsurance. The retention in this type of agreement is calculated based on all losses over the period of time that is stated in the treaty. The reinsurer is responsible for the amount of losses between the retention and the limit on the treaty.

Aggregate limit - The maximum amount an insurer will pay under a policy in any one policy period.

Agreed amount clause - An agreement between underwriter and insured whereby, in exchange for the purchase of coverage in an amount specified by the underwriter, the insured is protected from a coinsurance penalty. Agreed value clause - Though rare, some policies cover for a value agreed upon at the time of writing; if the property is lost because of an insured peril, the amount stated in the policy will be paid. Fine arts insured under a personal articles floater or homeowners scheduled personal property endorsement are examples.

Aircraft coverages - Though aircraft have long been an important element in the lives of most Americans, insurance of aircraft exposures has remained outside the mainstream of property and liability insurance markets. Aircraft hull and liability insurance is the counterpart of personal or commercial auto policies coverage. Aircraft products insurance is the counterpart of products liability coverage. Air cargo insurance is mirrored in motor truck cargo. Hangarkeepers liability is akin to garagekeepers coverage. As with any specialty line of insurance, the absence of standardized forms limits practice to specialists in the line.

Alcoholic Beverage Control (ABC) laws, see Dram shop laws.

Aleatory contract - A contract in which the number of dollars to be given up by each party is not equal. Insurance contracts are of this type, as the policyholder pays a premium and may collect nothing from the insurer or may collect a great deal more than the amount of the premium if a loss occurs. Not to be confused with contract of adhesion.

Alien insurer - An insurance company formed under the laws of a country other than the one it is doing business in.

Alienated premises - Property that has been sold by an insured.

All risks - A property policy expression now out of fashion. It was used to designate contracts that promised coverage against "all risks of direct physical loss" in contrast to forms that covered for specific, named perils. The word "all" came to be perceived as open to broader interpretation than insurers intended and it was dropped in favor of the promise to cover "risks of physical loss." See Named perils and also Open perils.

Allied lines - Lines of insurance that cover for perils other than fire, that are usually sold with fire insurance, e.g., "fire and allied lines."

Alternative dispute resolution (ADR) - Methods other than lawsuits that are designed to resolve legal disputes. Examples are arbitration and mediation.

Ambiguity - A standard policy provision that proves to be ambiguous may be interpreted in the light most favorable to the insured.

American Agency System - The system of selling insurance through agents who receive omissions in lieu of salary.

American Association of Insurance Services (AAIS) - An association of insurance companies providing filing and various technical services on behalf of its member companies.

Americans with Disabilities Act (ADA) - Passed by Congress in 1990, this act requires that "reasonable accommodation" be made in public accommodations, including the workplace, for those with physical or mental disability.

American College, The - An educational institute conferring the Chartered Life Underwriter (CLU) designation.

American Lloyds - Unincorporated associations of individual underwriters who assume specified portions of liability under each policy issued. There is no connection with Lloyd’s of London.

Anniversary date - The anniversary of the original date of issue of a policy as shown in the declarations.

Annual aggregate deductible - A deductible applied annually to the total amount paid in claims during a policy period. Claims are generally subject to a per-occurrence deductible; the aggregate is the limit beyond which no further deductibles are applied.

Anti-coercion laws - Usually contained in a section of the state code entitled "Unfair Trade Practices," these provisions define the use of coercion as an unfair practice and, hence, a violation of the state law.

Anti-rebating laws - Laws found in all but two states which prohibit an agent’s refunding part of a commission to an applicant as an inducement for placing insurance through the agent. California and Florida allow rebating of commissions on a limited basis.

Apparent authority - The perceived ability of an agent to bind an insurance contract to an insurance company. If an agent or agency holds themselves out as representing a particular company it is reasonable for the public to assume that such authority is established contractually, even if it is not. Apportionment - The method of dividing a loss between multiple insurers that cover the same loss.

Appraisal - A determination of the value of property for the purposes of determining the proper amount of insurance to be bought or in adjusting a loss.

Appurtenant structure - Another structure on the same premises as the principal structure. A detached garage on a dwelling premises is "appurtenant" to the dwelling. Older homeowners forms refer to the "other structures" protected under the HO Coverage B as "appurtenant structures."

Arbitration clause - The clause in an insurance policy that spells out how disagreements over a claim are settled.

Arson - The intentional setting afire of property.

Assigned risk - A risk not be generally acceptable to any insurance company but for which the law says that insurance must be acquired. Personal auto liability is one such necessary coverage. Insurance companies doing personal auto business in a state can be required to accept assignment of a portion of the state’s unacceptable drivers as insureds.

Assigned risk plan, see Auto insurance plan.

Association captive - A captive insurer owned by the members of a sponsoring organization or group, such as a trade association.

Assumed liability - Liability assumed under contract or agreement. More commonly known as contractual liability.

Assured - A party who is a potential beneficiary of an insurance contract. The synonym "insured" is more commonly used.

Attorney-in-fact - An individual who is given authority to execute legal documents, including bonds; or the manager of a reciprocal exchange, which is an insurance arrangement whereby risk is transferred to other members. The attorney-in-fact need not be a lawyer.

Attractive nuisance - Condition that can attract and injure children. The occupants of land on which such a condition exists are liable for injuries to children. Examples of attractive nuisance: swimming pools; earth moving equipment; playground equipment.

Audit - Some policies (such as workers compensation) are written subject to an audit. Since workers compensation premium is based on the insured’s payroll, the insurer is entitled to audit the insured’s records at the end of the policy to verify that it has collected an adequate premium for the amount of payroll to which it was exposed.

Authorized insurer - An insurer granted permission by a state to sell specific lines of insurance within that state.

Auto insurance plan - Program set up by various states to ensure that everyone with a valid driver’s license will be able to purchase auto insurance. All auto insurers operating within a state are assigned insureds in proportion to the amount of auto premium written.

Automobile liability insurance - Insurance in which the insurer agrees to pay all sums for which the insured is legally obligated because of bodily injury or property damage arising from the ownership, maintenance, or use of an auto.

Automobile medical payments - Insurance applying to the medical, hospital, or funeral expenses of anyone injured while on or in an insured automobile. The coverage is not dependent on liability, being triggered simply by an accident. It may be included in either the Business Auto Policy or the Personal Auto Policy. See also Premises medical payments.

Auto physical damage insurance - Insurance on the vehicle, itself. This usually is broken down into collision and other than collision coverages.

Automobile shared market - A program in which all automobile insurers in each state make coverage available to car owners who are unable to obtain auto insurance in the voluntary market.

Entries Under "B"

Bailee - One who has is charged with the care of the property of another. For example, a garage is bailee of a customer’s ("bailor’s") car (the "bailment") and a jeweler is a bailee of customers’ jewelry while in for repair or appraisal.

Bailees customers’ insurance - Insurance designed to reimburse a bailee’s customers for loss without regard to liability.

Bailees floater - An inland marine form that covers — on an open perils basis — a bailee’s interest in personal property of others.

Bailees liability insurance - Insurance covering damage negligently caused by a bailee or employee to goods left in their care.

Bailment - The act of delivering property in trust to another for a limited time and specific purpose.

Bailor - The person delivering property to another in trust.

Bankers blanket bond - A bond designed to indemnify for loss of money, securities, etc., caused by: dishonesty of employees; robbery or theft from the premises; or robbery or theft while the insured property is in transit.

Basic causes of loss - The perils of fire, lightning, and removal of property from premises endangered by those perils as shown in the standard 1943 New York fire policy.

Basic named perils - Covered perils in a property insurance contract: fire, lightning, windstorm, civil commotion, smoke, hail, aircraft, vehicles, explosion and riot.

Beach plans - Sometimes known as windstorm plans or pools, these are plans devised by coastal states to insure the windstorm exposure of coastal properties. The plans operate in a manner similar to a joint underwriting association, with participation by all insurers operating within a state.

Bench error - A mistake in the production process of a product that causes a loss. Such losses are usually covered.

Betterment - A term used to express the difference in the value of property before loss and after restoration. If a 20-year roof is damaged by an insured peril and it has to be replaced in its 15th year and the restoration renews the 20-year life expectancy, the owner has obtained a 15-year betterment in the roof. Without replacement cost insurance on the roof, the owner is expected to reimburse the insurance company for the "betterment" entailed in the restoration. Also see Improvements and betterments.

BI - A shorthand expression for "bodily injury."

Bid bond - Guarantees an owner, the "obligee," that the accepted contractor will actually undertake the work and that the contractor will furnish performance, payment, and, perhaps, maintenance bonds — or that the contractor will pay the owner the difference between the amount of the contractor’s accepted bid and the bid of another contractor who has to be called in to complete the project.

Binder - An insurer’s agreement, by way of an agent, to provide non-life insurance on the spot, pending issuance of the policy contract.

Binding authority - The authority extended to an agent by an insurer to provide insurance, usually on a temporary basis, until a policy can be written.

Blanket bond - An employee dishonesty or fidelity bond covering all persons of a group or class; as opposed to bonds naming specific individuals (name schedule) or positions (position schedule).

Blanket coverage - A means of insuring various items of property under one limit of liability.

Blanket insurance - Insurance covering multiple items of property as a group. Covered property may be at one location or several.

Bobtailing - A trucking term that means the driving of the tractor portion of a semi after the trailer has been delivered and removed. A special trucking endorsement, Truckers Insurance for Non-Trucking Use, may be necessary when bobtailing.

Bodily injury - A term that refers to physical injury, sickness, or disease, or death resulting therefrom. In some jurisdictions "bodily injury" includes emotional injury.

Bodily injury liability - Legal obligation that flows from the injury or death of another person. This insurance is commonly limited to bodily injury liability derived by way of negligence, but coverage of liability by way of contract (holding another harmless) is also possible.

Boiler & machinery insurance - Fired vessels, steam generators, mechanical and or electrical objects and turbines, are all examples of "objects" that might be listed for coverage under a boiler and machinery policy. Coverage is for damage to covered property caused by an accident to an object identified in the policy’s schedule. Coverage includes extra expense, automatic 90-day coverage at new locations, defense against liability claims, and supplementary payments like those provided under public liability policies.

Bond - A document for expressing surety. A bond engages three entities; the "surety" (bonding company) sells the bond to the "principal" for the purpose of paying the amount the principal will owe to the "obligee" upon failure of the "principal" to perform some act or provide some service under agreed terms.

Bond, fidelity - A bond that guarantees the principal’s honesty.

Bond, surety - A surety bond is the financial assumption of responsibility by one or more persons for fulfilling another’s obligations.

Book of business - The accounts written by an agent or company. It can be expressed in a number of ways such as "total book" of business, "book of auto business," "homeowners business," etc.

BOP (Businessowners policy), see Businessowners policy.

Bordereau - A written schedule of insureds, premiums, and losses submitted to reinsurers under certain types of reinsurance agreements.

Boycott - Another practice defined as "unfair" under most states’ codes. Such a practice which occurs when someone in the insurance business refuses to do business with someone else until that person complies with certain conditions or concessions.

Broad form perils - A property insurance designation for coverage that extends beyond the basic named perils.

Broad form property damage endorsement - A commercial general liability endorsement that removes the care, custody, or control exclusion relating to the property of others and replaces it with a less stringent one.

Broker - One who represents the insured in arranging insurance. A broker may also serve as the agent of an insurance company. Typically, a broker does not have binding authority.

Builders risk insurance - A variation of property coverage specifically applicable to construction projects. It is commonly written in an amount to cover the value of the structure when completed. The premium charged takes into account that values at risk increase gradually over the term of the policy.

Bumbershoot - A form of coverage similar to an umbrella, having to do with ocean marine risks.

Business Auto Policy (BAP) - A standardized contract for writing liability and property coverage on commercial autos.

Business income coverage - Insurance protecting the income derived from an insured’s business activities when curtailed by a covered peril. Coverage includes reasonable extra expense the insured undertakes to expedite return to business operations.

Business income, dependent properties - Covering loss to an insured when the operations of a key supplier, customer, or "leader property" on which the insured’s operations are dependent, is shut down by a covered peril. Also referred to as "contingent business income."

Business personal property - A term relating to "contents" of a commercial enterprise. It may include furniture, fixtures, machinery and equipment as well as stock, all other chattels owned by the insured, and even use interest in building improvements and betterments.

Businessowners policy (BOP) - A package of property and liability insurance for small and medium size businesses, the BOP owes its origin to the success of the homeowners policy.

"Buy-Back" deductible - A deductible that may be eliminated for an additional premium in order to provide "first-dollar" coverage.

Entries Under "C"

Calendar year experience - Underwriting result based on earned premiums and booked incurred losses for the same calendar year reporting period, regardless of the dates of the loss events. Booked incurred losses include paid losses, beginning of year to end of year changes in case reserves, and IBNR.

Cancellation; flat, pro rata, or short rate - In a flat cancellation the full premium is returned to the insured. A pro rata cancellation means the insurer has charged for the time the coverage was in force. Short rate cancellation entails a penalty in excess of pro rata for early termination.

Capacity - An insurer’s (or reinsurer’s) top limit on the amount of coverage it has available. The term may also refer to the total available in the respective insurance or reinsurance market.

Captive agent - A representative of a single insurer. In the case of captive agents, the insurer owns and controls expiration dates and policy records. A captive agent is a member of what may be called an exclusive agency system.

Captive insurer - An enterprise with all the authority to perform as an insurance company, but is organized by a parent company for the express purpose of providing the parent company’s insurance.

Care, custody, or control - An expression common to liability insurance contracts. It refers to an exclusion in the policy eliminating coverage for damage to property of others that is in the insured’s "care, custody, or control." The insured has a bailee relationship to the property, in other words, making the insured liable for the care of the property beyond damage caused by negligence. A bailees floater is often used to cover the insured’s obligation for the care of such property.

Cargo insurance - An inland marine or ocean marine policy covering cargo in the care, custody, or control of the carrier.

Cash-flow underwriting - Name given to an insurer’s practice of "nonselectively" writing business in order to generate greater amounts of cash for investment purposes.

Casualty insurance - The type of insurance concerned with legal liability for losses caused by bodily injury to others or physical damage to property of others.

Catastrophe (excess) cover - Another term for catastrophe reinsurance, wherein the ceding company is indemnified by the reinsurer after a specified loss amount is reached, for losses caused by catastrophes. Causes of loss forms - The reference is commonly to property insurance contracts and the form in question details those perils to which the coverage will respond. Though any property insurance contract must name the perils it intends to cover, e.g., crop hail, earthquake, perils of transit, and so on, the most commonly used general forms are the basic and broad named perils forms and the special form. In contrast to the named perils forms, that list specific perils for coverage, the special form contract covers simply risk of direct physical loss, relying on exclusions to delimit and define the coverage.

Cede - The transfer of all or part of a risk written by an insurer to a reinsurer.

Cedant - A ceding insurer or reinsurer. Ceding means to contractually transfer a portion of a risk or risks to a reinsurer.

Ceding commission - The cedant’s acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits, which often is expressed as a percentage of the gross reinsurance premium.

CERCLA, see Superfund.

Certificate of insurance - A written description of insurance in effect as of the date and time of the certificate. The certificate does not ordinarily confer any rights on the holder, i.e., the issuing insurer does not promise to inform the holder of change in or cancellation of coverage.

CGL (Commercial General Liability) see Commercial general liability.

CIC - Certified Insurance Counselor.

CLU - A designation — Chartered Life Underwriter — conferred upon successful completers of a series of studies of life insurance and related disciplines designed by The American College.

CPCU - A designation — Chartered Property Casualty Underwriter — conferred upon successful completion of a series of 10 exams on insurance and related disciplines designed by the American Institute of Chartered Property Casualty Underwriters.

Civil commotion - One of the extended coverage perils, paired with the peril "riot," which refers to a less widespread or generalized event than "riot" might be thought to encompass.

Claim Expense - The expense of adjusting a claim, such as investigation and attorneys’ fees. It does not include the cost of the claim itself.

Claims-made coverage - A type of public liability insurance that responds only to claims for injury or damage that are brought (to the insurer) during the policy period (or during a designated extended reporting period beyond expiration). This development was in response to "long tail" claims, such as those related to asbestosis injury, carrying over many years and multiple layers of coverage limits. However, most public liability policies are written on an "occurrence" basis, covering injury or damage occurring during the policy period even if a claim is brought months or even years later.

Clash cover - A type of catastrophe reinsurance for casualty insurance. The retention is equal to the highest limit of any one insurance policy covered by the agreement. Clash cover is written to cover all losses from one source, such as a construction site.

Class rates - When property or people share a certain number of characteristics relevant to the cost of providing them with insurance (such as a male driver under the age of 25 without an accident) underwriters can develop insurance rates that reflect the exposures represented by the "class" and offer insurance based on a class rate rather than by computing individual rates for each member.

Clause - A provision or condition affecting the terms of a contract. Coinsurance, cancellation, and subrogation clauses are typical insurance contract clauses.

Clean-up costs - Generally, those costs associated with the clean up of pollution.

Close or closely held corporation - A corporation that is owned by a small number of individuals who are related. A close corporation fills its own vacancies.

Coercion - Another act defined by most states as an "unfair trade practice." This one occurs when someone in the insurance business uses physical or mental force to persuade another to transact insurance.

Coinsurance clause - "Coinsurance" refers to the bargain between commercial property owners and the insurance industry. This clause in property policies encourages the property owner to gauge coverage needs by possible, not probable, maximum loss. With $1 million at risk but a probable maximum loss of $100,000, for example, the property owner would probably buy $100,000 insurance and bank on avoiding the larger disaster. The bargain offered by the insurance industry is a reduced rate per $100 of coverage if the owner agrees to buy coverage at a specified relation (80% commonly) to value (to possible maximum loss in other words). If the insured accepts the bargain but events prove the amount of insurance is inadequate to the stated coinsurance percentage, the insured becomes "coinsurer" in the same ratio as the amount of insurance bears to the amount that should have been carried.

Collapse - A property insurance peril, subject to its own specific agreement in property policies, which otherwise insure on an open perils basis.

Collision damage waiver - When paired with an auto rental agreement, the rental car company agrees to waive the renter’s responsibility for any physical damage to the rental car in exchange for an additional payment. Sometimes called a "loss damage waiver."

Collision insurance - A type of physical damage insurance available for automobiles. Coverage is triggered when damage is caused by striking against another object.

Combined ratio - The sum of an insurance company’s loss ratio and expense ratio; used as an indicator of profitability for insurance companies.

Combined Single Limit (CSL) - Liability policies commonly offer separate limits that apply to bodily injury claims and to claims for property damage. "50/100/25" is shorthand under such a policy for $50,000 per person/$100,000 per accident for bodily injury claims and $25,000 for property damage. A combined single limits policy might cover for $100,000 per covered occurrence whether bodily injury or property damage, one person or many.

Commercial blanket bond - A bond that covers the named insured against employee dishonesty. A single coverage amount applies to any one loss, regardless of the number of employees involved.

Commercial General Liability (CGL) - The CGL policy is an ISO form, widely used to provide commercial enterprises with premises and operations liability coverage, products and completed operations insurance and personal injury coverage. Premises medical payments coverage is often included as well.

Commercial lines - A distinction marking property and liability coverage written for business or entrepreneurial interests as opposed to personal lines.

Commissioner of Insurance - The official in a state (or territory) responsible for administering insurance regulation; sometimes called the Superintendent or Director of Insurance.

Common area - The part of a building or premises either owned by or used by all tenants or tenant-owners of the building (e.g. the swimming pool at a condominium).

Comparative negligence - A variation of contributory negligence, in which the comparative degree of negligence for each party to an accident is taken into account when awarding damages.

Compensatory damages - The award, usually monetary, that is intended to compensate the claimant for injury sustained.

Completed operations insurance, see Products and completed operations.

Completion bond - A bond that guarantees a lending institution or other mortgagee that a building or other construction that they have lent money on will be completed on time so it can used as collateral on the loan.

Comprehensive personal liability insurance - Provides individuals and family members with protection from legal liability for most accidents caused by them in their personal lives. Note that any legal liability claims submitted while in the course of business activities are not covered.

Comprehensive physical damage (automobile) - Traditional name for physical damage coverage for losses by fire, theft, vandalism, falling objects, and various other perils. On Personal Auto Policies, this is now called "other than collision" coverage. On commercial forms, it continues to be called "comprehensive" coverage.

Concurrent causation - When two perils contribute concurrently to a property loss, one excluded and the other not, the effect of the exclusion tends to be voided in a policy covering on an open perils basis. A concurrent causation exclusion is found in current forms.

Condition - One of the obligations of either the insured or the insurer imposed in the insurance contract.

Condominium - Type of dwelling where the structure is owned jointly while spaces within the structure are owned individually. Special property and liability forms cover the interests of the condominium association and of unit owners.

Condominium association coverage - A policy that provides coverage for the building, elements of the building, and liability needs for those who collectively own a piece of property.

Condominium unit owners form - A policy that provides coverage for the personal property, owned elements of a unit, and liability for the individual unit owner.

Consequential loss - An indirect consequence of direct loss to property. Business income may be lost when a store burns down, or frozen goods may spoil when windstorm causes an interruption of power. Consequential or indirect loss is not generally insured by policies covering direct damage (i.e., by fire or wind as in these examples), but insurance is readily obtainable separately for most such consequential exposures — business income coverage being among the most common.

Construction bond - A bond that guarantees the owner of a building under construction that it will be completed. If the contractor cannot finish the work, the insurer is obligated to see that the work is performed.

Constructive total loss - This condition is said to exist when the cost of repairs exceeds the actual cash value of damaged property.

Contingent business income, see Business income, dependent properties.

Contingent liability - Liability imposed on a business entity (individual, partnership, or corporation) for acts of a third party for which the business entity is responsible.

Contract of adhesion, see Adhesion contract.

Contractors equipment floater - Coverage designed for the special needs of contractors to insure their machinery and other equipment.

Contractual liability - Liability that does not arise by way of negligence but by assumption under contract. For example, in certain leases, a tenant may assume a landlord’s liability to others for unsafe conditions on the premises. Some such assumptions are covered automatically under the Commercial General Liability form.

Contributory negligence - A defense to a negligence action in which it is asserted that the claimant failed to meet the standard required for his or her own protection, and that that failure contributed to the loss.

Controlled business - The amount of insurance countersigned, issued or sold by a producer covering that producer’s interests, immediate family, or employees. Many states limit the amount of controlled business that may be written, by placing a maximum percentage of all business that may be "controlled."

Convention (or Statement) blank - The uniform annual financial statement that must be filed by all insurers, as prescribed by the National Association of Insurance Commissioners. The convention blank must be filed annually in an insurer’s home state and every state in which it is licensed to do business.

Corporation - A business whose articles of incorporation have been approved in some state. For insurance purposes, the type of business structure helps to determine who is insured on the policy.

Countersignature - An authorized signature of agent or company representative on an insurance policy. Usually pertains to policies sold by an agent of the insurer located in another state.

Court bonds, see Judicial bonds.

Coverage trigger - In liability insurance, the "trigger" is the event that brings coverage into play. It may be either an occurrence of bodily injury or property damage; or, in a form with a claims-made trigger, the formal making of a claim.

Covered loss - An accident, including accidental damage by forces of nature, that brings a contract of insurance into play.

Credit card forgery - A criminal act involving the illegitimate use of credit cards to obtain goods or money. Limited coverage for such losses is automatically provided in most homeowners policies.

Crime insurance - A broad category covering loss of property through criminal activity — from employee dishonesty to burglary and robbery, computer fraud, and forgery.

Crop insurance - Insurance covering growing crops against hail, wind, and fire. Protection against a broader range of perils can often be arranged as well.

Entries Under "D"

Daily - The document—now more commonly found in electronic than in paper form — that provides insurer and agent with a quick reference to all pertinent information relative to a contract of insurance: insured’s identification, location, coverage, term, premium, and so on. Sometimes referred to as a "daily report."

Data processing insurance - Coverage for electronic media, computers, and other electronic data processing equipment.

Deadheading - A trucking term that means the driving of a tractor-trailer that is empty, usually on the return trip from delivering goods. A special trucking endorsement, Truckers Insurance for Non-Trucking Use, may be necessary when deadheading.

Debris removal clause - A consequential coverage commonly included in direct loss policies. For example, fire policies provide limited recovery for the insured’s cost of removing the debris after a covered fire. Not to be confused with removal.

Declarations page - That part of a property or liability insurance policy that discloses information pertinent to the coverage promised including names, addresses, limits, locations, term, premium, forms, and so on. The same information, perhaps in a shorthand version, is contained as well in the daily.

Deductible - The part of the loss that is to be borne by the insured.

Demolition insurance - When a building is damaged beyond a certain point, say 50% destroyed, local building codes may direct that the structure be razed. Insurance to cover this exposure (and the lost value of the undamaged but newly razed part) can and clearly should be arranged whenever it exists. Increased cost of construction coverage to meet current building codes should be provided as well.

Dependent properties, see Business income, dependent properties.

Deposit premium - When the price of insurance is tied to fluctuating values or costs that cannot be known until the end of the policy period, inventory or payroll are two common examples, a deposit or provisional premium or estimated premium may be charged at the outset of a policy with final adjustment to come at the end of the term.

Depositor’s forgery insurance - Coverage against loss due to forged checks, notes, etc. Limited coverage is automatically included in homeowners contracts. Commercial establishments can purchase crime coverage with this feature.

Depreciation - As property ages and becomes worn it often loses value. That loss of value must be taken into account in any adjustment of property insurance that covers loss of actual cash value.

Difference In Conditions (DIC) - Property insurance obtained through the excess and surplus lines market to supplement and expand on the property coverage available through admitted markets. DIC has been called the "property umbrella" policy.

Direct damage - Physical damage caused to property by a peril such as fire or lightning.

Direct loss - The immediate consequence of the action of an insured peril. A fire-damaged structure is a "direct loss" by fire. In contrast, see Consequential loss.

Direct premiums - Premiums collected from policyholders before premiums for reinsurance are paid.

Direct writer - An insurer that sells coverage directly via its own employees. Contrast with independent agent.

Directors and officers liability insurance - A form of errors and omissions insurance covering the directors and officers of corporations against suits alleging they committed wrongful act(s).

Discovery period - The period of time, commonly one year, after the termination of a surety bond during which covered loss may be discovered, reported, and covered.

Dishonesty, Disappearance, and Destruction ("3-D") policy - The name once applied to a form used for comprehensive crime coverage. Now known as ISO Form C.

Dram shop laws - State laws pertaining to selling and serving alcoholic beverages and the public liability these activities may entail. Also called alcoholic beverage control (ABC) laws.

Dram shop liability insurance, see Liquor liability insurance.

Drive Other Car (DOC) endorsement - A business auto or garage policy endorsement providing coverage for named individuals while driving nonowned autos in situations unrelated to the business of the insured.

Druggists liability insurance - A form of professional liability insurance for druggists.

Duty to defend - Part of the insuring agreement of many policies. The insurer has the duty to defend the insured in event of a covered loss.

Dwelling forms - Forms for coverage of dwellings and personal property that are not eligible for homeowners coverage. Tenant occupied rental properties are commonly insured under these forms.

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