Commercial Insurance Terms Glossary
A
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost )
APPRAISAL
A survey to determine a property's insurable value, or the amount of a loss.
AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are: 1.Bodily injury liability, for injuries the policyholder causes to someone else. 2.Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder's car. 3.Property damage liability, for damage the policyholder causes to someone else's property. 4.Collision, for damage to the policyholder's car from a collision. 5.Comprehensive, for damage to the policyholder's car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. 6.Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
B
BALANCE SHEET
Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.
BINDER
Temporary authorization of coverage issued prior to the actual insurance policy.
BLANKET INSURANCE
Coverage for more than one type of property at one location or one type of property at more than one location. Example: chain store
BODILY INJURY LIABILITY COVERAGE
Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
BOILER AND MACHINERY INSURANCE
Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone and computer systems.
BOND
A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.
BROKER
An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.
BUSINESS INCOME AND EXTRA EXPENSE INSURANCE (also known as BUSINESS INTERRUPTIONINSURANCE)
Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. It also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises. Depending on the policy, civil authorities coverage may start after a waiting period and last for two or more weeks.
BUSINESSOWNERS POLICY / BOP
A policy that combines property, liability and business interruption coverages for small- to medium-sized businesses. Coverage is generally cheaper than if purchased through separate insurance policies.
C
CLAIMS MADE POLICY
A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities. (See Occurrence policy )
COINSURANCE
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses.
COLLISION COVERAGE
Portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision.
