Glossary

accident

Unexpected, unforeseen event not under the control of the insured and resulting in a loss. The insured cannot purposefully cause the loss to happen; the loss must be to due to pure chance according to the odds of the laws of probability. For example, under a personal automobile policy if an accident occurs, the insured is covered for loss due to his/her negligent act or omissions resulting in bodily injuru or property damage to another party.

cover note

Statement made by agent or broker in writen form attesting to the insured that the insurance policy is in effect. This statement is prepared by the agent or broker, unlike the binder, which is prepared by the insurance company (insurer).

insurance

Mechanism for contractually shifting burdens of a number of pure risk by pooling them.

insuring agreement

Section describing coverages under a policy. Elsewhere in the policy other sections may restrict or exclude coverages.

insurance agent

Representative of an insurance company in soliciting and servicing policyholders. An agent`s knowledge concerning an insurance transaction is said to be the knowledge of the insurance companu as well. Wrongful acts of the agent are the responsibility of the company; these bind the company to the customer. Notice given by an insured to the agent is the same as notice to the company.

insurance broker

Representative of an insured, not of an insurance company. Acts of a broker are not the responsibility of the company, and notice given by an insured to a broker is not the same as notice the company. The broker searches the insurance marketplace for a company in which to place the insured`s business for the most coverage at the best price. The broker is not restricted to placing business with any one company.

insurance company, insurer

Organization that underwrites insurance policies. Insurer offering protection through the sale of an insurance policy to an insured.

insurance coverage

Protection under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits.

insurance policy

Written contract between an insured and an insurance company stating the obligations and responsibilities of each party.

insurance premium

Rate that an insured is charged, reflecting his or her expectation of loss or risk. The insurance company will assume the risks of the insured (lenght of life, state of health, property damage or destruction, or liability exposure) in exchange for a premium payment. Premiums are calculated by combining expectation of loss and expense and profit loadings. Usually, the periodic cost of insurance is computed by multiplying the premium rate per unit of insurance by the number of units purchased. The rate class in which the insured is placed includes large numbers of individuals with like charasteristics who pose the same risk. Every individual in a given class will not incur the same loss; rather each has approximately the same expectation of loss.

insured

Party covered by an insurance policy. In life insurance policies there is one designated insured, the person so named; or a policy can be issued to numerous insureds on a group basis. The insured persons in property and casualty policies may also include residents of the insured`s household, such as a spouse, relatives of either, and other individuals under their care, custody.

insured peril

Source of loss that is covered under an insurance policy, such as a fire, and exsplosion, among others.

loss

Damage through an insured`s negligent acts and/or omissions resulting in bodily injuru and/or property damage to a third party; damage to an insured`s property; or amount an insurance company has a legal obligation to pay.

policy

Written agreement that puts insurance coverage into effect.

policy conditions

Actions that the insured must take, or continue to take, for the insurance policy to remain in force and the insurance company to process a claim. For example, the insured must pay the premiums when due, notify the insurance company as soon as possible in the case of an accident, and cooperate with the company in defense of the insured on case of liability suit.