Property Insurance Glossary

Question 1

Reserve

Answer 1

funds held by the company to help fulfill future claims. Minimum reserves are usually set by the state Department of Insurance.

Question 2

Multi-line insurer

Answer 2

independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs

Question 3

Stock Companies

Answer 3

insurance companies owned and controlled by a group of stockholders

Question 4

Nonparticipating plan

Answer 4

insured is not entitled to share in the divisible surplus of the company

Question 5

Mutual Companies

Answer 5

have no capital stock; it is owned by its policy owners

Question 6

Participating Plan

Answer 6

plan under which the policy owner receives shares (commonly called dividends) of the divisible surplus of the company.

Question 7

reinsurer

Answer 7

insurance company that provides financial protection to insurance companies

Question 8

Fraternal Benefit Societies

Answer 8

nonprofit benevolent organization that provide insurance to its members

Question 9

Fair Credit Reporting Act

Answer 9

federal law requiring an individual to be informed if she is being investigated by an inspection company.

Question 10

Buyer’s Guide

Answer 10

informational consumer guide books that explain insurance policies and insurance concepts;

Question 11

Policy Summary

Answer 11

summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums.

Question 12

(NAIC)

Answer 12

National Association of Insurance Commissioners

insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements.

The NAIC does not directly MAKE laws, as laws are made at the state level.

Question 13

State Guaranty Association

Answer 13

established by each state to support insurers and protect consumers in the case of insurer insolvency,

guaranty associations are funded by insurers through assessments.

All authorized insurers are legally required to participate in the State Guaranty Association for any state they are authorized to do business in regardless of where their corporate office is.

Question 14

Consideration

Answer 14

Consideration is often said to include the initial premium and completed application for insurance.

Question 15

The Insuring Agreement (Insuring Clause, Insurance Provision)

Answer 15

insurance policy in which the insurer promises to make payment to or on behalf of the insured.

Question 16

Casualty (Liability) Insurance

Answer 16

Casualty insurance includes vehicle insurance, liability insurance, theft insurance, workers’ compensation insurance, and elevator insurance. Casualty insurance protects you financially in the event that someone sues you.

Question 17

Property and Casualty Insurance

Answer 17

insures against the potential to harm people in ways that could cause them to sue you.

The main kinds of property and casualty insurance include auto insurance, home-owner’s insurance, renter’s insurance and umbrella insurance.

Question 18

Proof of loss

Answer 18

If the insured wants paid, they must PROVE the loss occurred.

Question 19

Declaration page

Answer 19

basic information about an insurance policy.

The named insured, address, policy period, location of property, policy limits, and other key information.

Question 20

Industrial Insurer

Answer 20

Insurance is also sold through a special branch of the industry known as home service or debit insurers. These companies specialize in a particular type of insurance called industrial insurance, which is characterized by relatively small face amounts with premiums paid weekly.

Question 21

Risk

Answer 21

uncertainty regarding loss; the probability of loss occurring

Question 22

Peril

Answer 22

immediate specific event causing loss and giving rise to risk.

Question 23

Pure Risk

Answer 23

risk that involves the chance of loss only; there is no opportunity for gain; insurable.

Question 24

Speculative Risk

Answer 24

risk that involves the chance of both loss and gain; it is not insurable.
(Gambling)

Question 25

Law of Large Numbers

Answer 25

larger the number of individual risks combined into a group

Question 26

Risk Pooling

Answer 26

loss sharing, spreads risk by sharing the possibility of loss over a large number of people.

It transfers risk from an individual to a group.

Question 27

Risk Transfer

Answer 27

act of shifting the responsibility of risk to another in the form of an insurance contract.

Question 28

Risk Retention

Answer 28

being aware of the risks involved and taking precautions for financial protection.

Question 29

Risk Reduction

Answer 29

chances of loss are lessened. Changing one’s lifestyle to minimize a known risk is an example of risk reduction.

Question 30

Risk Avoidance

Answer 30

individuals avoid risk entirely. It is the act of not doing something that could possibly cause a loss

Question 31

Hazard

Answer 31

something that increases the risk or change of loss

Question 32

Reinsurance

Answer 32

acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

Question 33

Moral Hazard

Answer 33

Dishonest client who intentional damages his own property

Question 34

Morale Hazard

Answer 34

Careless client with no pride of ownership of his own property

Question 35

Adverse Selection

Answer 35

is selection “against the company.” Tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others.

Question 36

Loss Ratio

Answer 36

The loss ratio compares the total incurred losses of the insurer with the total collected insurance premiums but does not take into account the underwriting expenses like the combined ratio does.

Question 37

Broad Form

Answer 37

The Broad form is named perils coverage on both the dwelling and the contents and the perils covered closely parallel the HO 2 Form.
This Named Perils DP-2 form includes all of the DP-1 Basic Form perils, plus Vandalism and Malicious Mischief.

Question 38

Special Form

Answer 38

DP-3 is Open Perils coverage on the dwelling and structures but offers named perils coverage on contents.

Open Perils or Special from coverage was referred to as “All Risk” coverage.

The special form, or DP3, is the most comprehensive coverage available under the Dwelling Program.

Question 39

Property Coverages

Answer 39

There are five coverages available for the three Dwelling:
Coverage A – Dwelling,
Coverage B – Other Structures (detached),
Coverage C – Personal Property,
Coverage D – Fair Rental Value,
Coverage E – Additional Living Expenses.

Question 40

Loss Settlement

Answer 40

Personal property loss is settled at actual cash value,

Dwelling and other structures are replacement cost basis (except the DP-1 which is ACV on structures and contents), but the insured must be in compliance with the coinsurance amount at 80%.

Question 41

Mortgage Clause

Answer 41

The mortgagee (lender) will be paid under Coverage A and Coverage B as their interest appears.

the Mortgagee has 60 days to file a proof of loss.

The mortgagee also will receive 10 days’ notice prior to any cancellation or nonrenewal.

The insurable interest of a mortgagee is limited to the principal balance remaining on the mortgage at the time.

Question 42

Concealment or Fraud:

Answer 42

No coverage with be provided to an insured who has committed fraud

Withholding of Material Fact

Question 43

You, Your, We and Us

Answer 43

insured and the spouse of the insured if the spouse lives at the same address as the insured.

Question 44

Landscape

Answer 44

Shrubs, trees, plants and lawns are covered up to 5% of the dwelling coverage A amount,

maximum of $500 for each tree, shrub or plant In Forms HO-4 and HO-6 the coverage limit is 10% of the personal property coverage amount (Coverage C)

a $500 per item limit.

Question 45

Debris Removal:

Answer 45

Covers removal of volcanic ash plus debris from tree removal when a tree is damaged or felled by a covered peril (windstorm, hail or weight of ice, snow or sleet).

Question 46

Fair Rental Value:

Answer 46

Pays the fair rental value to any part of the premises rented to another minus any expenses that do not continue while the premises are not fit to live in.

Question 47

Additional Living Expenses

Answer 47

Any necessary increase in living expense incurred by the insured to allow the household to maintain its normal standard of living.

Question 48

Civil Authority Prohibits Use

Answer 48

Additional Living Expenses and Fair Rental Value are covered for up to two weeks if the prohibited use of the insured residence was the result of direct damage to neighboring premises by a covered peril.

Question 49

Grave Markers

Answer 49

Grave Markers protection pays up to $5,000 (including mausoleums) on or away from the residence premises for loss caused by a peril under Coverage C (whose limits are not increased).

Question 50

Trailer

Answer 50

Trailer includes semitrailer, or a dolly used to convert a semitrailer into a trailer. But for Trailer Interchange Coverage only, “trailer” also includes a container.

Question 51

Trucker

Answer 51

Trucker means any person or organization engaged in the business of transporting property by “auto” for hire

Question 52

Mobile Equipment

Answer 52

1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;
2. Vehicles maintained for use solely on or next to premises you own or rent;
3. Vehicles that travel on crawler treads;

Question 53

Electronic Data

Answer 53

A maximum of $2,500 will be paid for the cost to restore or replace electronic data which has been destroyed/corrupted by a covered loss (info on CD’s, tapes, etc.).

Question 54

Basic Form

Answer 54

The Basic Form, named perils, covers five basic perils including ●fire ● lightening ● vandalism ● sprinkler linkage and ● sinkhole collapse plus the nine extended coverage (EC) perils.

Question 55

Civil Authority

Answer 55

Subject to the 72-hour waiting period, benefits will be paid for up to 4 weeks when the local municipality prevents the insured access to their premises because of nearby damage to premises or dangerous conditions.

Question 56

Liberalization

Answer 56

If the company adopts any revision that would broaden the coverage under this policy without additional premium within 45 days prior to or during the policy period, the broadened coverage will immediately apply to this policy.

Question 57

Deductibles

Answer 57

The standard deductible in a BOP policy is listed as $500.

Question 58

Insured Premises

Answer 58

insured Premises means: the premises described on the Declarations Page,
This insurance shall cease ninety (90) days after the date you acquire the premises.

Question 59

Adventure

Answer 59

The adventure clause recognizes that vessels sailing the open seas are permitted to do all things required either on the open sea or while visiting a port that is within the norms of the “adventure” of a voyage.

Question 60

Aircraft Hull

Answer 60

Aircraft insurance policies general provide physical damage or what is referred to as “hull” coverage.

Aircraft Hull can be added to a CPP or written on a stand-alone basis.

Coverage is available on either a named peril or an open perils basis.

Question 61

Hull Insurance

Answer 61

Hull insurance which covers the ship against loss if damaged (collision) or destroyed but does not provide coverage for the cargo being transported on the vessel for which separate coverage is required under most circumstances.

Question 62

Aviation Insurance

Answer 62

Other property and liability contracts exclude property damage to aircraft owned or bailment property. Therefore, if a business firm does own aircraft the appropriate risk transfer device is Aircraft Hull insurance.

Question 63

Ocean Marine Insurance:

Answer 63

There are two types of ocean marine insurance:

1. Hull insurance which covers the ship if damaged or destroyed and
2. Cargo insurance which provides insurance for the cargo the ship and is separate coverage from hull insurance

Question 64

Perils of Sea

Answer 64

he normal accidents that happen that result in loss are covered (except for fraud or willful misconduct by the insured).

Question 65

Pilotage and Towage

Answer 65

pilotage refers to hiring another person to navigate a vessel into narrow or difficult ports by towing the vessel with a tugboat.

Question 66

Barratry

Answer 66

Committed with the knowledge of the ship’s owner, barratry is a wrongful act committed by crew or crew master.