The following glossary of insurance terms is provided for information purposes only. Glossy terms and definitions do NOT alter any proposal or policy issued by All Commercial Insurance, Inc., or it's affiliated insurance companies. All coverages will be subject to policy terms, exclusions and limitations as stated.
* * PLEASE READ YOUR POLICY FOR SPECIFIC DETAILS * *
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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
A
A.A.A. (American Arbitration Association): this group settles disputes between parties of a contract.
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AGC (Associated General Contractors of America): this association puts out several standard contracts used in the construction industry.
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A.I.A. (American Institute of Architects): a professional architect association that has drafted several standard forms of agreement that are used in the construction industry.
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ACCOUNTS RECEIVABLE: insures against loss to accounts receivable, which may be uncollectable through damage to records caused by an insured peril. Included in this coverage is interest on loans to offset collections and additional expenses resulting from impaired records. This coverage may be written on a month reporting basis for large organizations or on a nonreporting form for smaller firms.
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ACTUAL CASH VALUE (ACV): a term used in property insurance to donate the measure of recovery at the time of loss. ACV equals the cost to replace the damaged property less depreciation of that damaged property. The depreciation used is not the same as that used for accounting purposes but is an estimate of actual physical depreciation. "Book value" should never be used to establish insurable values because depreciation schedules used for accounting purposes do not correlate with physical depreciation.
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ACTUARY: an individual, often holding a professional designation, which computes statistics relating in insurance. Actuaries are most frequently used to estimate loss reserves and develop premiums. Professional designations are awarded by the Casualty Actuarial Society and the Society of Actuaries.
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ADDITIONAL INSURED: An individual or entity that is not automatically included as an insured under the policy of another, but for whom the name insured 's policy provides a certain degree of another, but for whom the name insured 's policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured 's incentive for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (such as employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (customers or owners of property leased by the named insured, for example).
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ADMITTED COMPANY: a company licensed to do business in a specified jurisdiction. For example, a company licensed to do business in California is an admitted company in that state.
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ADVERTISING INJURY: injury arising out of libel or slander, violation of the right to privacy, misappropriation of advertising ideas, or infringement of copyright, title or slogan committed in the course of advertising goods, products, or services.
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AGREED AMOUNT: an optional property coverage under which the insured and the insurance company agree on the stated value for the property. If the insured and the insurance company agree on the stated value for the property. If the insured purchases coverage in the amount of the agreed value, no coinsurance applies.
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AGREED AMOUNT CLAUSE: a provision in fire insurance policies covering certain classes of property, whereby the coinsurance clause is suspended if the insured carries an amount of insurance specified by the company (usually 90 percent or more of value).
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AGGREGATE: the maximum amounts payable by an insurance carrier on behalf a policyholder during any given annual policy period. Aggregate limits may be equal to or greater than the per occurrence or per accident policy limit. An insurance policy may have one or more aggregate limits. For example, the standard commercial general liability has two: the general aggregate that applies to all claims except those that fall in the products-completed operations hazard and a separate products-completed operations aggregate.
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ARBITRATION: a method of settling disputes between two parties of a contract in lieu of litigation. Usually each side selects one party and agrees upon a third to hear the evidence and render a decision.
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AUDIT: a survey of the insured 's payroll and/or gross receipts records to determine the premium that should be paid for the coverage furnished. Used in Workers ' Compensation and General Liability policies.
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AWARD: when an owner formally accepts a contractor 's bid or negotiated proposal.
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B
BAILEE: a person or concern having possession of personal property entrusted to him by the owner. An example would be a laundry, which has custody of customers ' clothing for washing or dry cleaning. Bailees are required to exercise the same care with the property of others as they would with their own property.
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BASIC FORM: a standardized cause of loss form naming 11 basic perils that may be insured against. It provides the most basic package of covered causes of loss.
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BEARING PARTITION: the same as load bearing wall. One that supports a vertical load, such as joists beams, girders, or floor trusses.
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BEARING WALL: a wall that supports any vertical wall in addition to its own weight.
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BID BOND: a bond filed with a bid for a construction or other project which guarantees that if the contractor has the low bid and is awarded the job, he will furnish the required Performance Bond.
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BINDER: a legal agreement issued by either an agent or an insurer to provide temporary insurance until a policy can be written. It should contain a definite time limit, be in writing, and clearly designate the company in which the risk is bound as well as the amount, the perils insured against, and the type of insurance.
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BLANKET CONTRACTUAL: policy coverage applying a single limit to any number of scheduled or nonscheduled locations.
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BLUE PRINT: a technical drawing created by an architect or draftsman detailing how a structure will be built.
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BOARD FEET: the standard unit of measurement for lumber. A piece of lumber that is 1 by 12 by 12 inches.
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BODILY INJURY: the injury to or death of another person.
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BODILY INJURY LIABILITY: a legal liability that may arise as a result of the injury to or death of another person.
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BODILY INJURY LIABILITY COVERAGE: protection against loss arising out of the liability imposed upon the insured by law for damages due to bodily injury, sickness, or disease sustained by any person or persons (other than employees). This is one of the types of coverage's (property damage liability being the other) provided by general and auto liability insurance.
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BOILER AND MACHINERY INSURANCE: insurance against the sudden and accidental breakdown of boilers, machinery, and electrical equipment. Coverage is provided on (1) damage to the equipment, (2) expediting expenses, (3) property damage to the property of others, (4) supplementary payments, and (5) automatic coverage is provided on additional objects. Coverage can be extended to cover consequential losses and loss from interruption of business.
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BOND: a three-party contract guaranteeing that if one person, the principal, fails to perform as specified or proves to be dishonest, the person to whom the duty is owed, the obligee, will be financially protected by the insurer of the bond, the surety.
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*OBLIGEE: broadly, anyone in whose favor an obligation runs. This term is used most frequently in surety bonds where it refers to the person, firm, or corporation protected by the bond. The obligee under a bond is similar to the insured under an insurance policy. In the case of a construction bond, the person for whom the building is being built is the obligee.
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*OBLIGOR: commonly called the principal. The bound y an obligation. In the case of a construction bond, the contractor is the principal.
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*SURETY: one who guarantees the performance or faithfulness of another. A surety can be either a corporation or individual, but it is usually an insurance company.
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BROAD FORM: a standardized causes of loss form naming 15 perils that may be insured against. It provides coverage against more perils than basic.
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BROKERS FEE: a fee charged by the broker for special services rendered to his client. Fee must be disclosed in advance, in writing, receive the consent of the client, and be reasonable under the circumstances. Usually brokers fee is fully earned even if the policy is canceled by the insurance company or the insured.
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BUILDERS RISK: indemnities for loss of or damage to a building under construction. Insurance is normally written for a specified amount on the building and applies only in the course of construction. Coverage is usually on an all risk basis. The builders risk policy also may include coverage for items in transit to the construction site (up to a certain percentage of value) as well as items stored at the site.
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BUSINESS AUTO POLICY (BAP) a standard automobile policy that can be used to insure physical damage to owned or hired autos and liability arising from, hired, or non-owned commercial automobiles. The BAP 's physical damage coverage can include collision, comprehensive, and/or named perils coverage. Uninsured motorists coverage and medical payments coverage may also be added by endorsement.
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BUSINESS AUTO COVERAGE FORM: the latest commercial Automobile Insurance coverage form, which may be written as a monoline policy or as part of a commercial package. This form has largely replaced the Business Auto Policy.
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BUSINESS INCOME INSURANCE: protection against loss of earnings of a business during the time required to rebuild or repair property damaged or destroyed by fire or some insured peril. The coverage is also called use and occupancy or business interruption. Business interruption losses are often greater than the direct damage losses that cause the interruption, and careful consideration should be given to insuring this exposure. Business managers should also determine if they have and should insure a contingent business interruption exposure. This type of exposure arises when the business is dependent on a key supplier or key customer that could experience a fire or major catastrophe that would make it unable to continue supplying component parts or purchasing the insured business ' products.
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C
CAL RETRO PROGRAM: program for insureds who develop premiums of $25,000 or greater. Cal BAP): a standard automobile policy that can be used too insure physical damage to owned or hired autos and liability arising from owned, hired, or non-owned commercial Retro Plan is a means of modifying workers ' compensation premiums based on losses for that year. It directly ties premiums paid to losses incurred. It guarantees lower premiums for favorable loss ratios. Contains penalty provisions and a maximum loss limitation or stop loss of $200,000.
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CANCELLATION: termination of a contract of insurance in force by voluntary act of the insurer or insured in accordance with the provisions in the contract or by mutual agreement.
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CARE, CUSTODY, AND CONTROL (CCC): a standard property damage liability exclusion found in most liability insurance policies. This exclusion precludes coverage for property which is in care, custody, or control of the insured. This exclusion may be worded so that it applies either to personal property only or to all property. Some companies will occasionally consider removing or modifying the exclusion on a specific or blanket basis.
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CERTIFICATE OF INSPECTION: a legal certificate that states that specified installation, alteration or repair work has inspected and is approved by the appropriate governmental body.
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CERTIFICATE OF INSURANCE: a document which evidence that an insurance policy has been issued and shows the amount and type of insurance provided. Certificates of Insurance are often required by lenders to show that financed property is insured. Contractors and subcontractors providing services to the business manager should also be required to provide insurance certificates. it is important to note that an insurance certificate is not a contract and does not place any obligations on the insurance company. Certificates are only a statement that insurance policies are in effect on the date they are issued.
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CERTIFICATE OF OCCUPANCY (C.O.): a document that certifies that a structure meets all appropriate ordinances and codes and is ready for its designated use.
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CHANGE ORDER: a written authorization outlining specific additional work or modifications that are to be done for a particular job.
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CLAIMS-MADE: a liability policy that will cover claims made (reported or filed) during the year the policy is in force for any incidents which occur that year or during any previous period that policyholder was insured under the claims-made contract. This form of coverage is in contrast to the occurrence policy, which covers today 's incident regardless of whether a claim is filed 1 or more years later.
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COINSURANCE CLAUSE: a clause under which the insured shares in losses to the extent that he is underinsured at the time of loss. the insurer grants a reduced rate to the insured providing he carries insurance 80, 90, or 100% to value. If, at the time of loss, he carries less than required, he must share in his loss. for example, if an insured has a building worth $60,000, then any loss the policy would be paid for on the basis of the comparison of $60,000 (amount carried) divided by $80,000 (amount agreed upon in advance) times the amount of loss. Thus, the insured would only receive 75% of a loss of $7,500 for a $10,000 loss.
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COINSURANCE PENALTY: amount of a property loss an insured must assume as a result of not carrying adequate limits if insurance as required by the policy 's coinsurance percentage.
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COLLISION INSURANCE: a form of Automobile Insurance that covers loss to the insured 's own vehicle clause by its collision with another vehicle or object of its upset but not covering bodily injury or property damage liability arising out of the collision.
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COMBINED SINGLE LIMIT: a single limit of protection for both Bodily Injury and/or Property Damage, contrasted with split limits, where specific limits apply to Bodily Injury and Property Damage separately.
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COMMERCIAL GENERAL LIABILITY (CGL) POLICY: a broad form of liability insurance which covers business organizations against liability claims for bodily injury and property damage arising out of their operations, products and completed operations, and independent contractors (but excluding coverage for liability arising out of the use of automobiles). Contractual liability and personal injury/advertising liability coverage's are also usually covered by the CGL. Contractual liability coverage insures the liability of others for which the insured agrees to be responsible in a business contract or lease. Personal injury/advertising injury liability coverage insures against false arrest and libel, slander, defamation of character, and disarrangement of goods communicated by the insured 's employees or in its advertising activities.
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COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE PART: general liability coverage which may be written as a monoline policy or part of a commercial package. "CGL" now means "commercial" general liability forms which have replaced the earlier "comprehensive" general liability forms. The latest forms include all sublines, provide very broad coverage, and two variations are available-"Occurrence" or "Claims-Made" coverage.
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COMMERCIAL GENERAL LIABILITY (CGL) POLICY: a broad form of liability insurance which covers business organizations against liability claims for bodily injury and property damage arising out of their operations, products and completed operations, independent contractors (but excluding coverage for liability arising out of the use of automobiles). Contractual liability and personal injury/advertising liability coverage are also usually covered by the CGL. Contractual liability coverage insured the liability of others for which the insured agrees to be responsible in a business contract or lease. Personal injury/advertising injury liability coverage insures against false arrest and libel, slander, defamation of character, and disparagement of goods communicated by the insured 's employees or in its advertising activities.
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COMMISSIONER OF INSURANCE: the title of the head of most state insurance departments. in some states, the title Director or Superintendent of Insurance is used instead.
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COMMITMENT LETTER: a letter stating that a bank will issue a mortgage and final total payoff, but will not necessarily give any interim financing.
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COMMON POLICY CONDITIONS: under the latest commercial lines program, a form including six common conditions which may apply to all coverage parts attached to a commercial policy.
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COMMON POLICY DECLARATIONS: under the latest commercial lines program, a common declaration page which is part of every commercial policy. It shows information applicable to the entire policy (policy number, insurer, insured, total premium, forms attached, etc.) Each individual coverage part may also have its own declarations page.
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COMPLETED OPERATIONS INSURANCE: a form of insurance issued particularly to various type of contractors. It covers a contractor 's liability for accidents arising out of jobs or operations that have been completed.
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COMPLETION BOND: this is a bond issued to a mortgagee. It guarantees that the construction for which the mortgagor has borrowed money will be completed and will be able to serve as collateral for the mortgage upon completion.
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COMPOSITE RATE: a single rate with a single basis of premium, e.g., payroll or sales. for this single rate the insured is covered for a variety of hazards, such as Premises and Operations, Completed Operations, products Liability, and Automobile. Its primary value is to make it simpler for the policy 's premium to be computed.
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COMPREHENSIVE COVERAGE: traditional name for physical damage coverage 's 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.
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COMPREHENSIVE GENERAL LIABILITY: provides liability coverage for bodily injury and property damage arising from accidents on premises, business operations in progress, products manufactured or sold, and completed operations. Bodily injury includes sickness or disease and death in addition to accidental injuries. Property damage applies only to claims from damage to tangible property or loss of use of tangible property not damaged.
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COMPROMISE AND RELEASE AGREEMENT: a settlement practice under which an injured worker agrees to a compromised liability amount (usually a lump sum) in exchange for releasing the employer from further liability.
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CONSTRUCTION BOND: this bond protects the owner of a building or other structure under construction in case the contractor cannot complete the job. if he defaults, the insurer is obligated to see that the work is completed.
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CONSTRUCTION MANAGER: a person who represents a project owner and is responsible for the management of the project rather than the actual construction of the structure, a.k.a.: Project Manager.
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CONTRACTUAL LIABILITY: liability that is passed from one party to another in a hold harmless or indemnity agreement. For example, a tenant in a building may hold the landlord harmless for any bodily sustained by the public in the premises. If an injured party sues the landlord, the tenant will have to hire an attorney to defend the landlord and pay any judgments made against the landlord. Contractual liability insurance covers this exposure.
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COST KEEPING SYSTEM: a system of keeping both labor and material costs that enables a contractor to know how actual costs compare with the estimate.
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CROSS LIABILITY: a situation that can arise when more than one organization is insured by a policy, such as commercial general liability (CGL) insurance. In that situation, one insured may injure or damage the property of and become legally liable to another insured. It may therefore be important for the policy to cover the cross liability of one insured to another. Most CGL and umbrella liability policies contain a severability of interest clause that allows coverage for cross liability suits by stipulating that the policy covers each insured as if each were insured by a separate policy (except with respect to the policy limits).
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CUBIC YARD: a quantity measure of 27 cubic feet.
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CUSTOM BUILDER: a contractor who builds on order from customers. Normally the custom builder is called by potential clients to submit a price for certain building job.
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D
DEATH BENEFIT: if the injury causes death, a benefit is payable to those dependent on the deceased for support at the time of injury.
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DECLINATION: rejection of an application for insurance by the insurer.
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DEDUCTIBLE: the portion of an insured loss to be borne by the insured before he is entitled to recovery from the insurer.
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DEPRECIATION: a decrease in the value of any type of tangible property over a period of time resulting from use, wear and tear, or obsolescence.
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DEVIATED RATE: companies that adhere to rates promulgated by a bureau sometimes offer lower rates than those recommended in certain areas. The company is said to have "deviated" from the bureau rate for that area.
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DIRECTORS AND OFFICERS LIABILITY: stockholder suits alleging negligent acts, errors, or omissions on the part of present or former corporate directors or officers have become common. This nonstandard insurance covers defense and settlement costs of the individual directors or officers, up to stated limits, or it covers the corporation and its obligations, if any, to cover these same costs.
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DIVIDENDS: the return of premium to an insured by the insurance company. Policies on which dividends may be paid are often called participating insurance. Dividends are most commonly used with workers ' compensation insurance, but general and automobile policies can also be participating policies. There are different types of dividend programs. A flat dividend involves the payment of a payment of a flat percentage of the premium. A sliding scale dividend program bases the percentage to be paid on the insured 's loss experience; the lower the loss, the higher the dividend. A retention plan is essentially the same as a sliding scale dividend plan, but the mechanics are slightly different.
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It is important to note that it is illegal to guarantee that dividends will be paid. Consider the possibility that the dividend will be reduced or omitted entirely when evaluating dividend plans. Research into the insures ' dividend-payment history can facilitate this analysis.
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DRY WALL CONSTRUCTION: a wall or ceiling material in sheets or panels that is applied dry, as opposed to a plaster wall.
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DUAL CAPACITY DOCTRINE: the legal doctrine that allows an employer, normally shielded by the exclusive remedy rule, to be sued by an injured employee for additional damages arising out of the commission of a wrongful act not related to the role of employer.
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DUCTS: in a house, usually round or rectangular metal pipes used for distributing air from a conditioning device such as a furnace or air conditioner, or as cold air returns.
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EARNED PREMIUM: the amount of the premium that has been "used up" during the term of the policy. For example, if a one-year policy has been in effect six months, half of the total premium has been earned.
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ELECTRONIC DATA PROCESSING (EDP) COVERAGE: specialized type of insurance designated to cover computer equipment, data systems, information storage media and expenses or income loss related to EDP losses.
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EFFECTIVE DATE: the date on which the protection of an insurance policy or bond goes into effect.
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ENDORSEMENT: a written or printed form attached to the policy which alters provisions of the contract.
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EQUIFAX: formerly know as the Retail Credit Company. It is an organization widely used by insurers to obtain information on applicants for underwriting purposes and sometimes on claimants. Their reports are known as Retail Credit Reports. Equifax also performs property inspection reports and conducts annual audits.
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EQUIPMENT FLOATER: a form which covers various types of equipment, e.g., construction equipment, against specified perils or occasionally on all-risk basis subject to exclusions.
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EMPLOYERS LIABILITY COVERAGE: a coverage which becomes effective when, for one reason or another, an injured employee 's claim is not covered under workers ' compensation law.
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In such a case, the employee usually files a lawsuit against the employer. In such a case, the employee usually files a lawsuit against the employer. This type of suite is not covered by the workers ' compensation coverage of the policy (which applies only to benefits required under workers ' compensation law.) It is also excluded by the commercial general liability policy. To avoid a potential gap, employer 's liability coverage is included in the workers ' compensation policy. It pays on behalf of the insured (employer) all sums which the insured becomes legally obligated to pay as damages because of bodily injury by accident or disease sustained by any employee arising out of and in the course of his or her employment.
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ERRORS AND OMISSIONS INSURANCE: (1) a form of insurance that indemnifies the insured for any loss sustained because of an error or oversight on his part. For instance, an insurance agency purchases this type of coverage to protect itself against losses from such things as failing to issue a policy; (2) a form of insurance which covers losses resulting from financial institutions failing to effect insurance coverage.
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ESTIMATE: the total assembled cost labor, materials, overhead, and profit for a project. This is also called a bid.
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EXCLUSIVE REMEDY: a doctrine that states that workers ' compensation is the sole remedy doctrine stood for more than 60 years, but has since been eroded by the "dual capacity" doctrine and "third-party-over" suits.
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EXPERIENCING RATING (MODIFICATION): mandatory rating plan approved by the California Insurance Commissioner which modifies an employer 's current premium based on past claims experience. The calculation is based on three elements: (1) size of risk; (2) severity of losses; (3) frequently of losses. Rating period covers the three years to the most recently completed policy years.
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EXPIRATION: the date indicated in an insurance contract as its termination date.
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EXPOSURE BASIS: basis to which rates are applied to determine premium. Exposures may be measured by payroll (as in workers ' compensation), receipts, sales, square footage, area, or worker-hours (as in general liability). The exposure base for a particular insured is multiplied by the manual rate to determine the manual premium.
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EXTENDED OTHER STATES COVERAGE: a manuscript endorsement that extends the workers ' compensation policy to cover employees if injured while temporarily located in a monopolistic state.
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EXTRA EXPENSE INSURANCE: coverage for business that would probably not shut down in the event of major physical damage to the property and would find it imperative to remain in operation. If a business is such that it could lose most of its customers during the temporary curtailment of its services, or if its services are vital to the public, then it needs extra expense coverage to insure against the extra cost of keeping the business operating despite damage to or destruction of existing facilities. Coverage can be combined with business interruption insurance.
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F
FACADE: the exterior front building.
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FACTORING: used when carrier pays only a percentage (0%-99%) of any earned dividend. Typical causes include underwriting results or adverse financial condition.
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FINE ARTS FLOATER: covers fine arts, such as antiques, leaded glass, and other art work of all types, usually on an all-risk basis.
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FLAT CANCELLATION: the cancellation of a policy as of its effective date, before the company has assumed liability. This requires the full return of paid premiums.
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FLOATER: a form of insurance that applies to movable property, whatever its location, if it is within the territorial limits imposed by the contract. The coverage "floats" with the property.
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FORM WORK: the temporary support built in the shape needed to hold poured concrete until it has reached sufficient strength to stand on its own. The formwork may be built of wood, steel or other material strong enough to support the concrete.
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FRONTING COMPANY: an insurance company which issues an insurance policy to the insured and then reinsures all or most of the risk the insured 's captive insurance company or elsewhere as directed by the insured. The fronting company may or may not provide claims adjusting or other services. A percentage of the premium is retained by the fronting company as a fee. This approach allows the insured to issue certificates of insurance acceptable and lenders and avoids the burden of licensing the insured 's captive in all states or of becoming a qualified self-insurer.
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G
GARAGE LIABILITY INSURANCE: insurance to protect garage owners or automobile dealers for liability arising out of their business operations.
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GARAGEKEEPERS LIABILITY: provides coverage to owners of parking garages, parking lots, body and repair shops, and similar business for liability as bailees with respect to damage to automobiles left in their custody for safekeeping or repair. Coverage is contingent upon establishing liability on the part of the insured.
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GENERAL CONDITIONS: usually a standard document that describes the responsibilities of the contract.
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GENERAL LIABILITY INSURANCE: a form of insurance designed to protect owners and operators of business from a wide variety of liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of an insured, products sold by the insured, operations completed by the insured, and contractual liability.
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GROUP PROGRAM: a "safety group" or large number of similar risks is created, the experience of which is pooled, and a dividend paid and distributed to all participants, providing the "group" is profitable.
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GUARANTEED COST INSURANCE: premium charged on a prospective basis but not on the basis of loss experience during the policy period. While an experience modifier derived from loss experience in past years may be used, there are no adjustments made to recognize the current year 's loss experience. The only adjustment to the premium made after the policy year is to recognize the insured 's actual exposure during the year. In other words, the premium is estimated at the beginning of the policy period based on estimated payroll, receipts, or whatever exposure base is determined, usually by a premium auditor, and is multiplied by the appropriate rate to yield the actual premium.
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H
HIRED AUTO LIABILITY COVERAGE: protects an employer against legal liability resulting from an auto that is leased, hired, rented or borrowed by insured. Liability coverage only, no physical damage to vehicle.
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HIRED AUTOMOBILE: autos the insured leases, hires, rents, or borrows, but not autos owned by employees or members of their households.
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HOLD HARMLESS AGREEMENT: a contractual agreement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts like leases, sidetrack agreements, and easements. For example, a typical lease may provide that the lessee must "hold harmless" the lessor for any liability from accidents arising out of the premises. The effect of such an agreement is that the lessee must provide a defense for the lessor, and if any judgment is rendered against the lessor, the lessee would have to pay.
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I
INCURRED BUT NOT REPORTED: this refers to losses which have occurred during a stated period, usually a calendar year, but have yet been reported to the insurer as of the date under consideration. For instance, insurance company statements prepared after the end of the calendar year would have to include an estimate of losses that occurred during that year but have not yet been reported.
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INCURRED BUT NOT REPORTED (IBNR): recognition that events have taken place in such a manner as to eventually produce claims but that these events have not yet been reported. In other words, IBNR is a loss that has happened but is not known about. Since it is impossible to know the value of a case not yet reported or investigated, a subjective estimate is often used by insurance companies to recognize losses incurred but not reported.
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INCURRED LOSS RATIO: the percentage of losses incurred to premiums earned.
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INCURRED LOSSES: generally means all open and closed claims occurring within a fixed period, usually a year. Incurred losses customarily are computed in accordance with the following formula: losses paid during the period plus an estimate of the value of outstanding claims at the end of the period minus outstanding losses at the beginning of the period. Incurred losses include reserves for open claims.
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INDEPENDENT CONTRACTOR: one who agrees to perform according to a contract and who is not an employee.
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INLAND MARINE: insurance originally developed by marine underwriters to cover goods while in cover goods while in transit by other than ocean vessels. It now includes any goods in transit, except transocean, as well as insurance for certain types of personal property, with the essential condition being that the insured property be movable. For example, floater policies covering equipment, tools, musical instruments, cameras, or jewelry are considered inland marine policies. Bridges and tunnels are also considered as inland marine because they act as instruments of transportation.
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INSTALLATION FLOATER: provides "all risk" protection on property in transit or at a customer 's premises that is to be installed. Once the equipment or supply has been installed, or upon acceptance and receipt by the purchaser, coverage ceases.
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INSURANCE DEPARTMENT: a regulatory department charged with the administration of insurance laws and other responsibilities associated with insurance. Insurance regulators determine or approve acceptable rates and policy forms for many lines of insurance and monitor the financial position of insurers operating in their states. They may also help members of the public who have disputes with an insurer. The commissioner of insurance is the head of this department in most states.
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INSURANCE DEPARTMENT: a regulatory department charged with the administration of insurance laws and other responsibilities associated with insurance. Insurance regulators determine or approve acceptable rates and policy forms for many lines of insurance and monitor the financial position of insurers operating in their states. They may also help members of the public who have disputes with an insurer. The commissioner of insurance is the head of this department in most states.
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INSURANCE GUARANTY ACT: the legislation enacted in many states providing for guaranty funds for the policyholders of insolvent insurers.
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INSURANCE POLICY: the printed form which serves as the contract between an insurer and an insured.
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INSURANCE SERVICES OFFICES (ISO): a nonprofit insured-owned association that collects statistical information, develops and files insurance rates with regulators, and drafts standard insurance policy forms for most limes of insurance (except workers ' compensation and surety.) Insurance Services Office is supported on an assessment basis by its member insurance companies.
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INSURED: the party to an insurance arrangement whom the insurer agrees to indemnify for losses, provide benefits for, or render services to.
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INTERIM FINANCING: a short term loan issued by a financial institution giving an individual money to pay subcontractors as various phases of a project are completed.
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J
JOB MEETINGS: periodic meetings held at the job site periodically to discuss progress and review any problems to be resolved.
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JOINT VENTURE: in the construction industry, a partnership formed by two or more contractors, usually to bid on larger jobs that a single contractor may not be able to bond.
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JOIST: the space between the adjacent surfaces of two members or components joined and held together by nails, glue, cement, mortar, or other means.
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LAPSE: termination of a policy because of failure to pay the premium. In Life Insurance, the term refers to nonpayment before the policy has developed any nonforfeiture values. If it has, and the premium is not paid, it is said to have lapsed "except as to nonforfeiture benefits that may apply."
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LETTER OR CREDIT: a credit document issued by a lending institution as security for performance of contract obligations.
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LIABILITY LIMITS: the maximum amount for which a Liability Insurance Company provides protection in a particular policy.
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LIEN WAIVER: a form of receipt that is completed and signed by a subcontractor or distributor when he is paid for his labor or materials.
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LINE OF CREDIT: the limit a bank will lend a contractor at any given time. It is also referred to as a contractor 's borrowing capacity.
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LIQUIDATED DAMAGES: a sum stated in a contract, as the measure of damages suffered by an owner due to the failure of a contractor to complete the work within a stipulated time. This usually figured as a fixed amount per day.
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LOCKED VEHICLE WARRANTY: an endorsement that modifies a floater policy which requires property contained in or on vehicles to be closed or locked. No claim for loss or damage by theft shall be valid unless occurring from violent, forcible entry which is evidenced by visible marks at point of entry into such a completely closed and locked vehicle.
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LONGSHORE AND HARBOR WORKERS ' COMPENSATION ACT (LHWCA): a federal act requiring employers to compensate injured longshoremen and harbor workers. LHWCA benefits are higher than those for most states, which makes insurance coverage under the Act more expensive that for state compensation acts. This exposure may be insured commercially, or the employer can file to become a qualified self-insurer. The classifications of persons falling under the provisions of this Act are broadening with time.
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LOSS CONVERSION FACTOR: factor typically ranges from 100 to 120. Used in dividend calculations to convert losses upward. Allows insurance company to protect against losses which might increase over time.
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LOSS DEVELOPMENT: the difference between the amount of losses initially estimated by the insurer and the amount reported in an evaluation on a later date.
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LOSS DEVELOPMENT FACTOR: this is a recent development under retrospective rating plans. It was designed to give the insurer additional money to allow for the subsequent development of losses and to reimburse for claims which are late in being reported. The factor was introduced primarily because of the effect of inflation on losses which take a long time to settle.
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LOSS INCURRED: the total losses, whether paid or not, sustained by an insurer during a given period., e.g., 12 months.
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LOSS LIMITATION FOR RETROSPECTIVE RATING & RETENTION PLANS: a limitation possible under retrospective rating plans: the losses used in computing the premium are limited to a selected amount. The effects of shock losses that would otherwise fall into the calculations of final retrospective or retention plan premium and thereby reduced. There is an additional premium charged for the loss limitation.
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LOSS RATIO: the losses divided by the premiums paid. The numerator (losses) can be losses incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio.
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LOSS RESERVE: the estimated liability for unpaid insurance claims of losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amount not yet due. The above describes a loss reserve as it would appear in an insurer 's financial statement. As to individual claims, the loss reserve is the estimate of what will ultimately be paid out on that case.
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LOSS RESERVE: an estimate of the value of a claim or group claims not yet paid. A case reserve is an estimate of the amount for which a particular claim will ultimately be settled or adjudicated. Insurers will also set reserves for their entire books of business to estimate their future liabilities.
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LOST POLICY RELEASE: a statement signed by an insured releasing the insurer from all liability for a lost or mislaid contract of insurance. It is usually signed after the company has issued a replacement policy.
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LOT: a plot or portion of land subdivided to form a larger area.
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MANUAL RATES: full rates as promulgated by Insurance Services Office general liability, automobile) and the National Council on Compensation Insurance (workers ' compensation) before application of any credits or deviations. The rates are determined by looking them up in a rating manual, hence the name. By law these rates are supposed to be adequate, reasonable, and nondiscriminatory.
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MECHANICS LIEN: a type of lien issued in favor of persons supplying labor or materials for a job. With it, clear title to the property cannot be obtained until the claim is settled.
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MEDICAL PAYMENTS INSURANCE: a form of coverage, optional in Automobile and other Public Liability policies, that provides for the payment of medical and similar expenses without regard for liability.
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MEDICAL TREATMENT: an injured employee is entitled to all necessary medical, surgical, and hospital treatment reasonably required to cure or relieve the effect or injury. Unlike most health insurance, there is no coinsurance, no deductible and no limit.
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MILLWORK: various finished and manufactured wooden building components made at a millwork plant or planning mill. Includes doors, windows, kitchen cabinet work, and molding, but usually does not include flooring or sliding.
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MINIMUM PREMIUM: the lowest premium that may be charged for an insurance policy. The minimum premium is charged for a policy when the manual premium (manual rate times exposure basis) is lower than the minimum premium. Sometimes policies, particularly umbrellas written in excess and surplus lines marketplace, are subject to a quoted "minimum and deposit premium." This is the minimum premium to be charged for the coverage, and even cancellation of the policy by the insured will not result in a return of the premium.
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MISCELLANEOUS UNSCHEDULED TOOLS: an equipment floater which insures the contractor for loss to his tools that have not been specifically scheduled on the policy. Subject to a locked vehicle warranty and maximums as noted on policy.
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MOBILE EQUIPMENT: equipment such as earthmovers, tractors, diggers, farm machinery, and forklifts that, even though self-propelled, is not considered an automobile for insurance purposes. Liability arising from mobile equipment is covered by the commercial general liability policy. Normally, it should be not insured in the auto policy. Physical damage coverage is usually provided by an "equipment floater."
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MONOPOLISTIC STATES: states that administer their own workers ' compensation insurance program, rather than the private insurance industry. These states are Nevada, North Dakota, Ohio, Washington, West Virginia, and Wyoming.
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MORTGAGE: the final contract and payment schedule a borrower has with a financial institution covering the balance of money he still owes.
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MOTOR VEHICLE RECORD (MVR): the record of an automobile driver 's accidents and/or traffic violations.
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MULTIPLE CONTRACT: a project that has several primary contractors without any one of them being in charge.
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NAMED PERILS: perils that are insured against by specific mention in named peril policies. These are distinguished from all risk policies, which insure against all perils except those that are specifically excluded. Named perils often include: fire, lightning, smoke, vandalism, malicious mischief, windstorm, hail explosion, collision, and collapse. Some optional perils that may or may not be insured include: flood, earthquake, volcanic eruption, sinkhole collapse, and damage from molten material.
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NEGLIGENCE: failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of commission or both.
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NON-ADMITTED INSURER: an insurer not licensed to do business in the jurisdiction in question.
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NON-OWNED AUTO LIABILITY COVERAGE: protects an employer against legal liability resulting when employees use their own autos for the employer 's business purposes.
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NOTICE OF CANCELLATION: the ISO Common Policy Conditions Form (IL 00 17) requires that only the first named insured of a policy be notified of cancellation by the carrier, but additional insureds with important interest at stake may insist on being notified as well. The specified additional insureds manuscript endorsement extends to cover an insurer 's obligation for notice of cancellation or policy changes by including those specified additional insureds identified in the endorsement.
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OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA): a federal statue which establishes safety and health standards on a national basis. The act is enforced by Labor Department safety inspectors and also provides for the record keeping of statistics relevant to work injuries and illnesses.
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OCCURRENCE INSURANCE: coverage for an occurrence, usually defined in liability policies as an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. Occurrence policies cover injury or damage that occurs during the policy period irrespective of when the claim is made against the insured. This is in contrast to a claims-made policy that covers only claims made during the policy period.
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OFFICERS, OWNERS OR PARTNERS-Included or Excluded: a term that refers to the workers ' compensation policy option that allows these individuals to be included or excluded from the policy as covered employees.
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OPEN RATING: a system whereby a state allows an insurer to use rates without prior approval.
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OTHER STATES COVERAGE: a term that refers to the practice of broadening the workers ' compensation policy to include automatic protection for all states not listed in section 3A of the workers ' compensation policy. This is usually done in section 3C.
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PARTICIPATING (Par): (1) insurance that pays policy dividends. In other words, it entitles a policy owner to participate in allocations of the insurer 's surplus. In Life Insurance, there are several options available for the use of such dividends, (2) insurance that contributes proportionately with other insurance on the same risk.
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PARTITION: a wall that subdivides space within a building.
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PAYMENT REQUISITIONS: a form that lists the items of work completed during a given time frame, which becomes the basis of the contractor being paid for the work completed.
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PERFORMANCE BOND: this bond is used to indemnify the project owner (or general contractor) for any loss that arises out of a contractor 's ( or subcontractor 's) failure to perform the work in accordance with the contract 's term and specifications. If this happens, the surety must either arrange for completion of the contract or pay the project owner or general contractor the cost of completing the work up the amount of the bond limit.
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PERIL: the cause of loss (e.g., fire, windstorm, explosion, hail, riot, vandalism, strife, malicious mischief, earthquake, flood, sinkhole collapse, volcanic eruptions, etc.)
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PERMANENT DISABILITY: a worker is entitled to compensation based on the rated degree of disability. Benefits are based on the earning capacity of the disabled worker. For disability ratings between 70% and 100%, a life pension is granted.
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PERSONAL INJURY: injury other than bodily injury arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation or a person 's right to privacy committed other than in the course of advertising, publishing, broadcasting or telecasting. Contrast with Advertising Injury.
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PITCH: the slope of a roof.
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PLAINTIFF: the party who brings a legal; action against another, called the defendant.
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PLANS: drawings for a project are called plans, prints or blueprints. They are drawn to scale and include construction details, specifications, and other critical information. The contractor translates this information into a finished structure.
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POLICY PERIOD (or Term): the period during which the policy contract affords protection, e.g., six months or one or three years.
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POLICY FEE: (1) a charge added to the first premium to help defray acquisition cost. (2) a flat, per policy charge that does not change with the size of the policy and thus serves as a form of quantity discount factor and quantity discount adjustment fee.
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POLICY YEAR: the period between policy and anniversary dates.
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POLICYHOLDER: (1) the person in actual possession of an insurance policy; (2) often used loosely to refer to the policy owner and/or insured.
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PREMISES AND OPERATIONS: the premises hazard exists when there is ownership or occupancy of property (the premises). A customer may have a premises claim against the insured is the newly waxed floors caused the customer to slip and fall. The operations hazard exists when activity in addition to occupancy of property exists. Most of our customers have this exposure rather than premises. A carpenter may be negligent and cut the electrical wiring, causing property damage to the building.
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PREMISES MEDICAL PAYMENTS: provides medical payments for persons, other than the named insureds, for bodily injury suffered on the premises, even though the insured was not negligent.
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PREMIUM: the price if insurance protection for a specified risk for a specified period of time.
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PREMIUM AUDIT: a review of the records of the insured company by an insurance company representative, the premium auditor, to determine the actual exposure base and premium due on a policy such as workers ' compensation. At policy inception, the premium is based on an estimate of the exposure base. The purpose of the premium audits is to determine what the exposure actually was during the insured period. The actual exposure is then applied to the previously agreed upon rates to determine the final premium.
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PRIME CONTRACTOR: any contractor who provides a contract directly with an owner.
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PRO RATA CANCELLATION: the cancellation of an insurance policy or bond with the return premium credit being the full proportion of premium for the unexpired term of the policy of bond. This is in contrast to short-rate cancellation where the return premium is less than the pro rate unearned premium.
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PROBABLE MAXIMUM LOSS (PML): the maximum amount of loss that one would expect under ordinary circumstances, such as fire departments responding, sprinklers working, etc. Contrast with Amount Subject.
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PRODUCTS-COMPLETED OPERATIONS LIABILITY: the liability for bodily injury or property damage incurred by a merchant or manufacturer as a consequence of some defect in a product sold or manufactured or the liability incurred by a contractor for bodily injury or property damage arising from a completed job. This coverage is provided by the standard commercial general liability policies unless excluded by endorsement.
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PROFESSIONAL LIABILITY: the professional person 's or the organization 's liability for damages. The purpose of professional liability insurance is to protect this person or organization against liability for damages (and the cost of defense) based upon his or her alleged or real professional errors and omissions or mistakes. This is also called errors and omissions insurance. Some of the available forms include: architects/engineers, medical malpractice, attorneys, law enforcement officers, pharmacists, trust department, escrow agents, accountants, and veterinarians.
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PROOF OF LOSS: a formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of tangible property.
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PROPERTY DAMAGE: refers to physical damage to tangible property and to loss of use of tangible property.
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PROPERTY DAMAGE LIABILITY INSURANCE: protection against liability for damage to the property of another, including loss of the use of the property, as distinguished from liability for bodily injury to another. In the majority of causes it is written along with Bodily Injury Liability protection.
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PROPERTY INSURANCE: insurance that indemnified a person with an interest in physical property for its loss or the loss of its income producing abilities.
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PUNCH LIST: a list showing what terms or work needs to be done to complete the work stated in the contract. Usually complied near the end of a job.
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PURCHASE ORDER: a form used to confirm a purchase.
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QUANTITY TAKEOFF: a list of the quantities of material required for a project.
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RATE: in fire and marine insurance, the cost of a unit of insurance. In other words, the fire insurance rate is applied to the insured value. In casualty insurance, rate is the annual cost per unit of the insurance company 's exposure to loss. In other words, a casualty insurance (e.g., workers ' compensation, general liability) rate is applied to an appropriate exposures base (e.g., payroll or sales).
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RATING BUREAU: an organization that collects statistical data on losses and exposures of businesses and promulgates rates for use by insurers in calculating premiums. The two most important rating bureaus are the National Council on Compensation Insurance and the Insurance Services Office, Inc. However, a number of states also use their own rating bureaus.
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REBATE: a portion of the agent 's commission returned to an insured or anything else of value given an insured as an inducement to buy. The payment of policy dividends, retroactive rate adjustments, and reduced premiums that reflect the savings of direct payment to an agent of home office are not usually considered to be rebates.
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RECISSION: (1) repudiation of a contract. A party whose consent to a contract was induced by fraud, misrepresentation of duress may repudiate it. A contract may also be repudiated for failure to perform a duty, (2) the termination of an insurance contract by the insurer when material misrepresentation has occurred.
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REINSTATEMENT: (1) restoration of a lapsed policy, (2) restoration of the original amount of a type of policy that reduces the principal amount by the amount of claims.
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REINSURANCE: insurance in which one insurer, the reinsurer, accepts all or part of the exposures insured in a policy issued by another insurer, the ceding insurer. In essence, it is insurance for insurance companies. It allows insurers to spread the risks of one policy among themselves and thereby write limits higher than one company would feel comfortable doing alone. Facultative reinsurance involves a one-time reinsurance transfer arranged specifically on a single policy. Treaty reinsurance involves an agreement in which a certain amount of the exposures of all policies written by the ceding company are automatically reinsured; in return, the reinsurer receives a percentage of all premiums on the reinsured book of business.
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REINSURER: an insurer that assumes all or a part of the insurance or reinsurance written by another insurer.
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RENEWAL: the automatic re-establishment of in-force status effected by the payment of another premium.
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RENEWAL CERTIFICATE: a short form certificate which is used to renew a policy. It refers to the original policy, keeping all of its provisions, but does not restate all of its insuring agreements, exclusions, and conditions.
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RENTAL VALUE COVERAGE: provides indemnity: (1) for the loss of rental value of the property because it has been damaged by an insured peril, (2) for the loss by the owner-landlord or the rent that would have been made payable by a tenant of the property, under the terms lease or by statue, when he is relieved of liability for the payment of rent during a period when the property cannot be occupied because of damage from a covered cause of loss.
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RENTS INSURANCE: a coverage that reimburses an insured with rental properties for the loss of rental income when damage is done to such properties by a covered peril.
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REPLACEMENT COST: the cost of replacing property without a reduction for depreciation. By this method of determining value, damages for a claim would be the amount needed to replace the property using new materials. Contrast with Actual Cash Value.
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RESERVE: (1) an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders, (2) an amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.
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RETAINAGE: the amount withheld by an owner as security until the contractor completes a job.
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RETENTION PLAN: a rating plan normally used in writing workers ' compensation insurance. This plan provides that the net cost to the policyholders is equal to a "retention factor" (insurance company profit and expenses) plus actual incurred losses subject to a maximum premium equal to a standard premium discount. With a retention plan, the full guaranteed cost premium is paid to the insurer. At the end of the policy period, the calculation is made and the premium is adjusted. If a return premium is indicated, it is paid as dividends to the insured.
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RETROACTIVE DATE: a provision found in many claims-made policies. The policy will not cover claims for injuries or damages that occurred prior to the retroactive date even if the claims is first made during the policy period.
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RETROSPECTIVE RATING: a rating plan that adjusts the premium, subject to a specified minimum and maximum, to reflect the current loss experience of the insured. Retrospective rating combines actual losses with graded expenses to produce a premium that more accurately reflects the loss experience of the insured. The adjustment, of course, is performed after the policy has expired.
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ROUGH-IN: a term that refers to the installation of basic plumbing, electrical, venting, or similar systems that can be completed prior to the installation of the fixtures.
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SCHEDULED CONTRACTORS EQUIPMENT FLOATER: an equipment floater which insures the contractor for loss to his tools, machinery and equipment that have been specifically scheduled on the policy.
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SECTION: a cutaway drawing, as in a blueprint, showing the heights, openings, and thickness ' of the various openings and materials.
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SHORE: a post, plank, or other support used to brace a wall during alterations, set obliquely, as a buttress.
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SHORT RATE CANCELLATION: a term used in insurance and bonding to describe the charge required for insurance or bonds in place for less than 1 year. Also it denotes the penalty assessed on the return premium for insurance or bonds canceled by the insured before the end of the policy period or term of the bond. Insurance policies provide that returned premiums be subject to short-rate cancellation if the insured cancels, but a pro rata return is provided if the insurer cancels.
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SINGLE LIMIT: any insurance coverage which is expressed as a single amount of insurance, or a single limit of liability.
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SLIDING SCALE: the amount of the dividend, generally expressed as a percentage of premium, is governed by the insured 's loss ratio.
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SPAN: the distance between structural supports such as walls, columns, piers, beams, girders, and trusses.
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SPECIAL CONDITIONS: a supplemental set of conditions that modifies or adds to the general conditions of a contract.
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SPECIAL FORM: a standardized causes of loss form covering losses that are not specifically excluded. It provides the most comprehensive perils coverage available. Commonly referred to as "All Risk"-protection from loss arising out of any fortuitous cause other than those perils or causes specifically excluded by name. This is in contrast to other policies which name the peril or perils insured against. All risk insurance is usually preferred over named perils insurance because it usually provided broader coverage and because it places a greater burden of proof on an insurer wishing to deny a claim.
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SPECIFIED PERILS COVERAGE: an alternative to comprehensive coverage on automobiles that provides named perils rather than all risks physical damage insurance. The names perils typically include fire, theft, flood, earthquake, windstorm, vandalism and malicious mischief, hail, and explosion. This coverage is slightly less costly than comprehensive coverage.
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SPECS: a term that refers to the architect 's or draftsman 's or draftsman 's blueprints that specify how and with what materials a building should be constructed;aka:plans.
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SPECULATIVE BUILDER: a contractor who buys a piece of land and builds a house or other building for sale. After purchasing the land, the contractor will go to a lending institution for a construction loan.
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STANDARD PREMIUM: the premium developed by multiplying the appropriate rate times the proper exposure unit. This figure is then modified by experience rating, if applicable. If the risk if not subject to experience rating, the premium at manual rate is the standard premium.
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STUB OUT: a term that refers to the practice of installing electrical and plumbing tubing or piping prior to the pouring of the concrete foundation.
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SUBROGATION: the assignment to an insurer by terms of the policy or by law, after payment of a loss, of the rights of the insured to recover the amount of the loss from one legally liable for it. After the insurer pays the insured 's claim, it subrogates against the party that caused the loss to recover the amount paid. Business managers should make certain that subrogation recoveries from third parties are subtracted from loss data used in experience rating or retrospective rating calculations.
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SUBROGATION WAIVER: a waiver by the named insured giving up any right of recovery against another party. Normally an insurance policy requires that subrogation (recovery) rights be preserved. In commercial insurance, a written waiver of subrogation rights is permitted if it is executed before the loss occurs.
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SUBSTANTIAL COMPLETION: the point of completion of a project when the owner can beneficially occupy the structure. The remaining items of work generally consist of the punch list.
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SURETY BOND: a bond guaranteeing that a principal will carry out the obligation for which he is bonded. A surety bond is most often issued to a contractor, a person seeking a license or permit, or someone involved in a court case.
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SURETYSHIP: a type of contractual relationship whereby the surety (usually the insurance company) guarantees to an obligee (i.e. the owner) that the principal (i.e. the contractor) will faithfully perform the obligations of a contract between the owner and builder. Construction bonds are a form of suretyship.
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SURPLUS LINES: a risk or a part of a risk for which there is no market available through the original broker or agent in its jurisdiction.
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T.C.O. (Temporary Certificate of Occupancy): a legal document that allows for temporary occupancy of a building pending the final inspection.
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T & M (Time and Materials): a method of costing a job whereby the work is agreed on between the contractor and the owner with payment based on the actual cost to the contractor for equipment, labor and materials, plus overhead and profit.
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TAX FACTOR: an amount applied to an insurance premium to increase it to cover state premium taxes. This is one of the factors used in the retrospective rating formula.
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TEMPORARY DISABILITY: the worker is also entitled to temporary disability payments while recovering from injury. The amount for these weekly payments begins to accrue after the third day of disability. Payments are based on two-thirds of weekly earnings subject to a maximum payment. When temporary disability is 14 days or less and does not require hospitalization, the three-day waiting period is not compensated to the employee.
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THIRD-PARTY-OVER: a doctrine that involves the injured employee bringing suit against a third party who for one reason or another is able to bring an action against the employer.
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UMBRELLA LIABILITY INSURANCE: a form of excess liability insurance available to protect against claims in excess of the limits of other primary policies or for claims not covered by the primary insurance program. This latter coverage requires the insured to be a self-insurer for a specified amount ($10,000 to $25,000). It generally provides excess coverage over the insured 's auto liability, commercial general liability, and employers liability policies. Care must be taken to coordinate all primary and excess policies to avoid coverage gaps.
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UMBRELLA POLICY: the broadest form of excess insurance combined with the equivalent of "all risks" liability coverage. The umbrella agrees to provide: (1) additional limits of protection over the underlying schedule, i.e., excess liability insurance, (2) primary coverage if the underlying limits are exhausted, and, (3) primary coverage for some otherwise uninsured risks, subject to a retention.
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UNDERWRITER: the employee of an insurance company or managing general agency who has the responsibility for determining whether or not the insurer will write insurance that has been applied for, the amount of coverage the insurer will write, and the premium that will be charged.
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UNDERWRITING: the process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.
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UNDERWRITING PROFIT (or Loss): (1) the profit of loss realized from insurance operations, as contrasted with that realized from investments, (2) the excess of premiums over losses and expenses (profit) or the losses over premiums (loss).
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UNEARNED PREMIUM: that portion of the written premium applicable to the unexpired or unused part of the period for which the premium has been paid. Thus, in the case of an annual premium, at the end of the first month of the premium period eleven-twelfths of the premium is unearned.
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UNINSURED MOTORISTS: coverage for which the insurer will pay damages to the insured for which another motorists is liable if that motorists is unable to pay because they are uninsured. This coverage usually applies to bodily injury damages only.
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VOCATIONAL REHABILITATION: the worker may be entitled to vocational rehabilitation if the injury prevents return to his or her usual occupation or the job held at the time of injury. This may include such services as job counseling, job modification, training or replacement assistance.
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WORKERS' COMPENSATION: compensation - required by law in all states - to workers injured while on the job, whether or not the employer has been negligent. Benefits vary according to state laws but generally require the payment of medical expenses and partial wage continuation. The workers ' compensation laws apply to all individuals except those specifically excluded. Employers are required by law to purchase insurance for their exposure unless they file for and obtain permission to become qualified self-insurers.
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WRAP-UP INSURANCE PROGRAM: also called an owner-controlled insurance program (OCIP), this involves the purchase by a building project owner of workers ' compensation and liability insurance on behalf of all most involved contractors. If properly designed and administered, this type of program can substantially reduce the insurance costs compared to what the contractors would otherwise collectively pay and pass on to the owner.
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WRITTEN PREMIUMS: the total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Contrast with Earned Premium.
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