Glossary of Insurance Terms

Insurance Policy

Definitions of Common Terms

Advertising Injury (AI) Liability for injury to reputation.

Due to libel, defamation, invasion of privacy, or similar

injuries, in written or published form.

Aggregate Limit The maximum amount that the carrier will pay out during the term of the policy.

Common in liability policies.
Agreed Amount An endorsement which waives the coinsurance clause in property insurance.

Auditable Policies Carrier sets a provisional premium based on the insured’s expected exposure.

When the coverage year is over, the carrier audits the insured’s accounts to determine the actual exposure.

-Less than expected, insured receives refund.

-More than expected, insured pays the difference. example: workers’ compensation

Bailee Coverage Also known as receiving room coverage.  Insurance coverage for a party who has temporary custody of

the property of another.  example: Staff holds deliveries in the office or at the lobby desk for residents until they pick them up

Basic Form In commercial property insurance, the insuring agreement that covers fire, lightning, riot, explosion, vehicles, smoke, hail,

aircraft, wind, vandalism, and malicious mischief.  The exposures covered may vary slightly by carrier.  Not as inclusive as special form.

Binding Proposal A proposal where the carrier has given the agent authority to commit the carrier to insuring the stated risk for the stated

premium, if the association accepts the proposal.

Blanket Coverage In property insurance, one limit and one deductible apply to all the buildings or units as a whole, rather than each

building or unit having its own limit and its own deductible.  In fidelity insurance, all employees are covered as a category, rather than specifically named individuals or positions.

Bodily Injury (BI) Liability for physical injury, sickness, or disease.

Broad Form In commercial property insurance, the insuring agreement that covers the exposures in basic form plus some damage from water escape, plumbing systems and certain damage from collapse.  The exposures covered may vary slightly by carrier.  Not as inclusive as special form.

Carrier’s Financial Size An insurance carrier’s financial size is an indicator of its relative capacity to absorb losses. This capacity is affected by the geographic regions and types of exposure it insures.  example: A carrier’s capacity to absorb losses will be affected if it insures for hurricane damage in the Southeast.

Carrier’s Rating An insurance carrier’s rating is an indicator of its ability to pay claims.  Its rating is also an indicator of how aggressively the carrier will respond to its coverage exposures and claim exposures with your association.  A rating is also a predictor of the carrier’s future rate stability  and coverage availability.

Claims-Made Basis A liability policy will cover a loss that is discovered and for Coverage reported during the period the policy is in effect.

The event need not occur during that period.  This is preferred coverage for directors’ and officers’ insurance and fidelity insurance for community associations.

Coinsurance A provision in some property policies that penalizes an insured for not maintaining a high limit of property coverage, often 80% to 100% of the total value.

Commercial General A part of the commercial package policy that provides  Liability (CGL) insurance coverage for legal claims arising from bodily injury, property damage, personal injury, and advertising injury

Commercial Package A policy that contains property and liability coverages and  Policy (CPP) possibly other coverages, hence the name “package policy.”  Modifications to the “package’ are made by means of  endorsements or options.

Common Policy The basic provisions that apply to all insurance coverages Conditions in the policy  examples: conditions for premium payment, renewal cancellation  May appear in a longer form or a separate endorsement.

Condominium Special policy conditions that have become standard for Endorsement condominium insurance.  Meet the needs of other types of community associations with similar property insurance requirements.

Special policy conditions include:

  • -Waiver of rights of recovery
  • -Recognition of an insurance trustee
  • -“No control” provision
  • -“Other insurance” provision
  • -Standard mortgage clause
  • -“Cross liability” clause.

Contingent Liability See loss of value.

Cost of Loss Adjustment A coverage which reimburses for costs associated with presenting a claim. If included in coverage at all, often limited to a nominal amount.

Coverage Trigger In liability insurance, the trigger is either the occurrence of an event or the making of a claim.

“Cross Liability” Clause Permits one party insured under the policy to bring a claim against another party insured under the policy.

Declarations Page This page describes the insurance contract. It usually lists the –

  • issuing company
  • named insured and address
  • policy number
  • policy period
  • policy premium
  • type of policy
  • amounts and limits
  • optional coverages
  • forms and endorsements.

NOTE: The declarations page can be more than one page long.

On the declarations page for any property package policy:

  • – The limit under Section 1 applies to the coverage for sudden accidental loss of the insured party’s own property.
  • – The limit under Section 2 applies to liability coverages.

Deductible The amount that the insured must pay on each loss before the carrier will make payment.

Defense Outside Limits Provision that the limit of liability coverage will not be reduced by the attorney’s fees related to defense of a claim.

Directors’ & Officers’ Liability and insurance coverage for wrongful acts by the

Liability (D&O) association, the board, officers, and certain other volunteers.

Discrimination Applying special treatment, (generally unfavorable) to an individual solely on the basis of a personal characteristic; such
as ethnicity, age, religion, or gender.

Duty to Defend Under this provision, the carrier has a duty to defend against a legal claim, even if it is groundless, false, or fraudulent.  In turn, the carrier retains the right to settle the claim.

Employment Practices Liability and insurance coverage for employee claims against an

Liability employer for such things as wrongful discharge or discrimination. Relatively new form of coverage that is available.  Different from employer’s liability for employee  injuries; included with workers’ compensation.

Endorsement Short insurance forms that can be included in a policy in order to add to the coverage, or subtract from it.

Environmental Coverage Insurance coverage for damage caused by pollutants.  Typically obtained only from carriers specializing in the

coverage.

Exclusion Provision in an insurance policy that indicates what kinds of loss are not covered.

NOTE: A loss can also be excluded from coverage by means of a restrictive definition, limit, or condition.

Experience-Modified Applies to large associations.  Policies Used frequently with workers’ compensation.  When a premium is of a certain size, the carrier applies a modifier which increases (surcharge) or decreases (discount) the premium.  The modifier is based on the history of the association’s claims under that particular policy.

The same basic concept is known as Individual Risk Premium Modification (IRPM) when it is used in other types of policies.

Fidelity Coverage Insurance coverage for the theft of money, securities, or property by one’s own personnel

Coverage often called employee dishonesty.  For the community association, this coverage must insure all persons who handle funds— whether or not they are compensated by the association.

Firm Proposal A proposal whose numbers won’t be changed by the agent, unless the specifications change.

Flood Coverage Insurance coverage for flood damage to buildings and contents when a body of water rises. Water that escapes from plumbing system or enters a building from above the surface of the ground is not considered a flood.

Typically obtained through the National Flood Insurance Program (NFIP), a Federal insurance program.

Forms Insurance forms define

  • -who or what is covered
  • -covered causes of loss
  • -qualifications to coverage.

There will always be some forms in a policy that are unique to the state involved because the insurance industry is state-regulated.

Glossaries Section of a form that defines key terms and concepts used.  Glossaries are important because the policy may define a word more narrowly than its common usage.  A narrow definition is a way for the carrier to restrict coverage.

Guaranteed A relatively new provision whereby the carrier agrees to Replacement replace damaged buildings after a covered loss even if the cost

Cost of doing so exceeds the limit of building coverage in the policy.

Increased Cost of A form of ordinance or building law coverage that pays for  Construction (ICOC) bringing a building up to current codes after a covered loss—if the law requires.

Increased Cost of A form of ordinance or building law coverage that pays for Demolition demolishing an undamaged portion of a building when the rest was damaged by a covered loss.  The action must be required by law for coverage to apply.

Often purchased with loss of value.  The fundamental facilities and systems serving an area.  examples: sidewalks, streets, storm water systems, underground lawn sprinklers

Inland Marine Insurance coverage for means of transportation, merchandise.  Coverage in transit, property in the custody of bailees, and a variety of movable property.  examples of movable property: walkie-talkies, tractors

Insurable Value Appraisal An independent service estimates the insurable replacement costs of property.

Insurance Policy A contract between the insured party and an insurance carrier that consists of the following items:

  • Declarations Page
  • Forms
  • Endorsements
  • Optional Coverages
  • Common Policy Conditions
  • Glossaries

Insurance Services An independent organization supported by insurance carriers.

Office (ISO)
Services include developing and disseminating standard insurance forms.

Liability Exposure Possibility of losses due to a person or entity bringing or threatening to bring a legal claim against the association because of a legal wrong it is alleged to have committed or for which it is supposedly responsible.

Liability claims include:

  • Advertising Injury
  • Bodily Injury
  • Directors & Officers Wrongful Acts
  • Employment Practices
  • Personal Injury
  • Property Damage

Loss Control Deficiencies that insurance carriers identify when they inspect

Recommendations an association’s property and operations prior to issuing coverage.

Mandatory recommendation— Failure to comply may mean loss of coverage.

Voluntary recommendation— Noncompliance will not imperil coverage at the current
time.

Loss of Value Also known as contingent liability

A form of ordinance or building law coverage that  pays for the value of any undamaged portion of a building when codes require a building damaged by a covered loss to be demolished. Often purchased with increased cost of demolition

Master Policy A name given to the association’s primary policy which provides coverage for property and liability

Now also used to refer to a single policy insuring several
associations.
Mechanical Breakdown Also known as boiler and machinery coverage. Insurance
Coverage coverage for physical damage caused by certain sudden, accidental events that originate inside machinery or electrical equipment.

Also pays for building damage caused by steam boiler explosions.

Net Income Exposure Possibility of losses that involve a decrease in association revenues or an increase in expenses.

“No Control” Provision Preserves coverage for loss caused by an insured party (such as an owner) acting outside the control of the association.

Occurrence Basis A liability policy will cover an event that occurs during the  for Coverage period the policy is in effect—even if the event is reported after the policy has expired.

Occurrence Limit The limit to the amount that the carrier will pay out under a policy for one incident or occurrence.

Optional Coverages Provisions within a form or endorsement that only apply if noted on the declarations page.  Multiple options usually appear in the longer forms.

Ordinance or Building Following an insured loss to property coverage that pays for

Law Coverage construction expenses incurred because of building laws.  The three coverages included are increased cost of construction (see), increased cost of demolition (see), and loss of value (see).

“Other Insurance” The associations master policy is treated as the primary coverage

Provision in the event that a unit owner and the association carry insurance the same property.

Pay on Behalf of The carrier will pay when the claim is adjudicated. In this  Insured Parties situation, the carrier is likely to take the lead in settlement negotiations.

Personnel Exposure Possibility of losses that result from the death, disability, retirement, resignation, or unemployment of association

employees.  Under certain circumstances, may apply to association board members, owners, or volunteers.

Personal Injury (PI) Liability for injury to reputation because of something said or done. It does not involve written or published statements.

Injury may be due to slander, defamation of character, false arrest, wrongful entry or eviction, invasion of the right of  private occupancy, malicious prosecution, or willful detention.

Personal Property Things that are movable—as distinguished from real property.  examples: inventory; furniture, equipment, supplies, electrical supplies, electronic data processing, and valuable papers and records

Policy Limits The amount of dollar coverage provided for each identified area of coverage.

Premium The rate charged for an insurance coverage.

Property Damage (PD) Liability for damage to someone else’s property—or for the loss of use of that property

Property Exposure Possibility of losses that involve damage to the insured party’s property—or the loss of use of that property.

Protective Safeguards An endorsement that provides a premium credit for having an Endorsement protective system.  example: a building sprinkler system.  CAUTION: If a system is deactivated without meeting certain reporting conditions, coverage may be voided.  example: building sprinkler system deactivated and fire occurs. Damage would not be covered.

Ratable Limit The limit used to determine the premium for a guaranteed replacement cost for buildings.

Real Property Land and whatever is erected or growing on it, or affixed to it.  examples: trees and buildings

Replacement Cost The amount of money it would cost to replace the property at today’s prices.

Retroactive Date A date set in the past by a claims-made policy to limit the policy’s coverage of past events.

Self-Retained Limit In an umbrella liability policy, the self-retained limit operates like a deductible if no underlying insurance applies.

Special Form In commercial property insurance, the insuring agreement that covers every accidental cause of  loss except those explicitly

excluded.  Special form is more inclusive than basic form and broad form.

Standard Mortgage Clause A standard clause which applies if a mortgage is attached to a unit.  Enables the carrier to make payments to the mortgage holder and to send notices to the lender (such as a termination of coverage notice).

Sublimit Usually a fixed lower limit for a certain type of property no matter how high the limit of property coverage is.  example: Coverage for exterior signs is no more than $500.

Superseded Suretyship A provision that a newly-issued policy covering employee dishonesty will respond to a loss committed during a previous
policy term—even though the current policy may not be a renewal. Often applies to theft that occurs over a period of time.

Umbrella Liability Insurance that provides both additional and broader coverages

Coverage beyond the limits of the association’s commercial general liability and other liability coverages.

Underlying Limits The minimum amounts which so-called primary or underlying or Requirements liability policies must provide as specified by the umbrella policy in order for it to pick up where the underlying policies end.

Unit Owner Certificate Statement provided to a unit owner indicating that the unit is covered by a master policy.  Proof of insurance coverage for unit mortgage lenders.

Valuation The estimated worth or price of something.

Vehicle Coverage Insurance coverage for association-owned vehicles that must be licensed for highway use is called commercial automobile coverage.  Insurance coverage for legal claims arising out of the use of the use of vehicles that are not owned by the CA, but are used while acting on its behalf, is called hired and non-owned automobile liability insurance.

Waiver of Rights Formerly known as waiver of subrogation of Recovery.  Carrier waives its contractual right to recover a  claim payment from certain parties that may be responsible for a loss.  The special condominium endorsement routinely extends this waiver to unit owners.

Workers’ Compensation, Insurance coverage which pays for the medical bills, lost wages,

Including Employer’s and certain other benefits due injured employees.

Liability State laws usually mandate this type of coverage. Employer’s liability coverage protects employers from suits brought on behalf of injured employees to recover damages separate and distinct from claims for workers’ compensation benefits.

Wrongful Acts Includes negligent acts, omissions or breaches of  duty or errors relating to the operation of the community association.

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