Actual Cash Value (ACV)

Replacement cost minus depreciation.

Additional Insured

A person or organization added to a policy at the request of the named insured.

Adhesion Contract

A contract where one party sets the terms and the other must accept or decline as is.

Aggregate Limit

The maximum amount an insurer will pay for all claims during a policy period.

All Perils

Broadest form of auto physical damage coverage combining Collision and Comprehensive.

Binder

Temporary proof of insurance before the formal policy is issued.

Blanket Insurance

A single limit of insurance applying to multiple locations or types of property.

Bodily Injury

Physical injury, sickness, or disease sustained by a person, including death.

Broker of Record (BOR)

A letter designating a specific broker to represent the insured to an insurer.

Business Interruption

Coverage for lost income following a direct physical loss to property.

Claims-Made Policy

Coverage triggered by when the claim is reported, not when the event occurred.

Co-Insurance

A penalty clause requiring the insured to maintain a certain percentage of value in coverage.

Commercial General Liability (CGL)

Standard policy protecting businesses against liability for BI and PD.

Conditions

The part of the policy that outlines the duties and responsibilities of both parties.

Declarations Page

The "Dec" page summarizing the policy limits, premium, and insured details.

Deductible

The portion of a loss that the insured must pay before the insurer contributes.

Directors & Officers (D&O)

Liability coverage for management decisions leading to financial loss.

Earned Premium

The portion of a premium that the insurer has "kept" for the time elapsed on the policy.

Endorsement

A document that modifies the terms, conditions, or coverage of the original policy.

Errors & Omissions (E&O)

Professional liability coverage for negligence in providing a service.

Exclusion

Specific perils or property types that are explicitly not covered by the policy.

Experience Rating

Adjusting premiums based on the insured's individual loss history.

Exposure

The state of being subject to a loss.

Fidelity Bond

Insurance against losses resulting from employee dishonesty or theft.

First-Party Coverage

Coverage for the insured's own property or person.

Hard Market

A period characterized by high premiums and strict underwriting.

Hazard

A condition that increases the likelihood or severity of a loss.

Indemnity

Restoring the insured to their pre-loss financial position.

Insurable Interest

A legal/financial stake in property such that its loss would cause financial hardship.

Liability

Legal responsibility for the injury or damage caused to others.

Loss Payee

An entity (like a bank) to whom claim payments are made alongside the insured.

Moral Hazard

The risk that an insured might intentionally cause a loss due to having insurance.

Named Perils

Coverage only for risks specifically listed in the policy.

Non-Owned Auto

Coverage for liability arising from employees using their own cars for business.

Occurrence

An accident or continuous exposure to conditions resulting in injury or damage.

Overline

Writing a larger amount of insurance on a risk than is normally allowed.

Peril

The cause of a loss, such as fire, wind, or theft.

Personal Injury

In liability, includes libel, slander, or false arrest (not physical bodily injury).

Premium

The amount of money paid by the insured for the insurance policy.

Pro Rata

A proportional cancellation method where the insurer keeps only the daily earned premium.

Replacement Cost

The cost to replace property with new materials of like kind and quality, no depreciation.

Retention

The amount of risk an insured keeps for themselves (similar to a deductible).

Short Rate

A cancellation method where the insurer penalizes the insured for early termination.

Soft Market

A period of low premiums and high competition among insurers.

Subrogation

The insurer’s right to recover claim costs from the responsible third party.

Third-Party Liability

Coverage for the insured's legal liability to others.

Umbrella Policy

Excess liability coverage that sits over primary policies (CGL, Auto).

Underwriting

The process of evaluating and pricing risk.

Utmost Good Faith

The legal principle that both parties must be completely honest.

Waiver

The voluntary relinquishment of a known legal right.