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Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

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.

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.

A person who investigates a loss and negotiates settlement with the claimant on the insurance company’s behalf.

Advisor

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.

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.

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.

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.

A temporary or preliminary agreement, which provides coverage until a policy can be written or delivered.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

A person trained in evaluating risks and determining the rates and coverages that will be used for them.

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