States we serve: VA, MD, DC, PA, NC, SC, and WV
Glossary of Insurance Terms
Annuity
An annuity is a life insurance product that pays periodic income benefits either for a specific period or over the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant, while immediate annuities allow payments to begin within about a year of purchase.
Auto Insurance
An auto insurance policy encompasses multiple types of coverages, some of which may be required by law while others are optional. These coverages include bodily injury liability, property damage liability, collision coverage, comprehensive coverage, uninsured motorists coverage, and underinsured motorist coverage.
Beneficiary
A beneficiary is a person or entity designated to receive the benefits from an insurance policy in the event of a claim. This term is most commonly used in the context of life insurance, where the beneficiary is the individual or group designated to receive the death benefit upon the policyholder's passing.
Broker
An intermediary between a customer and an insurance company. Insurance brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.
Business Owners Policy/BOP
An insurance policy that combines coverage for property damage, peril, liability, and business interruption for small-to medium-sized businesses. Coverage is generally less expensive than if purchased through separate insurance policies.
Claim
A claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event. The claim is filed when the policyholder believes an event or damage has occurred which is covered under their policy terms. The insurance company then reviews the claim to verify the validity of the incident and determine the extent of their liability.
Coinsurance
Coinsurance in property insurance imposes a penalty on the insured's claim reimbursement if the purchased insurance limit falls below a specified percentage of the property's value. Essentially, coinsurance penalties occur when the policyholder hasn't bought enough insurance to cover a required portion of their property's value.
Commercial Insurance
Products designed for and bought by businesses. Major coverages are commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, professional liability, surety and fidelity, and workers compensation.
Captives
An insurance company that is wholly owned and controlled by its insureds. A form of self-insurance.
Deductible
The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
Directors and Officers Liability
Covers directors and officers of a company for negligent acts or omissions, and for misleading statements that result in suits against the company, often by shareholders. Directors and officers insurance policies usually contain three types of coverage:
Side A Coverage: This provides coverage directly to individual directors and officers when the company cannot indemnify them (e.g., insolvency of the company). It protects personal assets from claims alleging wrongful acts in their capacity as directors or officers.
Side B Coverage: Also known as corporate reimbursement coverage, Side B reimburses the company for the costs it incurs when indemnifying directors and officers for covered claims. This coverage is crucial for protecting the company's balance sheet and ensuring it can fulfill its indemnification obligations.
Side C Coverage: This part of D&O insurance, also called entity coverage or entity securities coverage, protects the company itself from claims arising out of securities-related lawsuits. It covers claims made against the company as a result of alleged wrongful acts in connection with the company's securities, typically in relation to investors or shareholders.
Endorsement
An endorsement is a document that amends or adds to the terms of an existing insurance policy. It can modify coverage, terms, or conditions, either by extending or restricting the benefits provided under the policy. Endorsements are used to tailor an insurance contract to fit specific needs of the policyholder, without having to issue a new policy.
Event insurance
Event insurance provides financial protection for specific events against potential losses due to unforeseen circumstances or liabilities. This insurance can cover various aspects, including cancellation or postponement due to weather, vendor no-shows, damage to the venue, or injuries to guests.
Exclusion
An exclusion refers to specific conditions or circumstances that are not covered by an insurance policy. Exclusions are detailed in the policy documentation and serve to limit the insurer's liability for certain risks. Exclusions help insurers avoid covering risks that are considered too high or outside the scope of the standard policy.
Extended Coverage
An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
E&O (Errors and Omissions)
A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
Excess and Surplus
Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) and must be purchased from a non-admitted carrier.
Farm
Policy that protects the policyholder against named perils and liabilities that could disrupt or threaten the viability of agricultural operations. Farm insurance can include coverage for property, liability, crop, livestock, and farm income.
Fire
Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
Flood
Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Coverage for flood damage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy
Gap Insurance
An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company.
Group Insurance
A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
Homeowners – does/doesn’t cover
The typical homeowners insurance policy covers the house, the garage, and other structures on the property, as well as personal possessions inside the house such as furniture, appliances, and clothing, against a wide variety of perils including windstorms, fire, and theft.
Hard Market
A hard market is known as a “seller’s market.” During a hard market, we see increased premiums, restricted coverage, diminished underwriting appetite and capacity, and less competition among insurance companies for new business. It can be more difficult to obtain insurance coverage and prices are not as favorable to the buyer during a hard market.
Hired and Non-Owned Auto Insurance
Non-owned autos are vehicles owned by employees and used for company business. Hired autos are vehicles your business leases, hires, rents, or borrows that are used in the course of doing business. Hired and non-owned insurance provides liability coverage for property damage and bodily injuries caused by you or your employees while driving for work when using hired or non-owned vehicles.
Independent Agent
Agent who represents several insurance companies.
Inland Marine
Inland marine insurance covers goods, equipment, and movable property during land-based transportation. It evolved from traditional marine insurance to address risks associated with inland transport and movable property not tied to a fixed location. Coverage includes transit protection for goods transported by trucks or trains, floaters for items like construction equipment, and bailee’s coverage for businesses responsible for customers’ property. Inland marine insurance protects against risks like theft, accidents during transit, and damage to goods while being moved over land.
Insurable Risk
Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.
Key Person Insurance
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.
Liability Insurance
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
Liquor Liability
Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.
Long-Term Care Insurance
Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as individual insurance or through an employer-sponsored or association plan.
Loss of Use
A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
Malpractice Insurance
Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.
Marine Insurance
Marine insurance is designed to protect vessels, cargo, and associated interests during ocean or waterway transport. It covers the ship itself (hull insurance), the goods being transported (cargo insurance), and legal liabilities arising from maritime activities (liability insurance). This insurance addresses risks unique to sea transport, such as sinking, fire, piracy, and collisions. Essential for businesses in international trade, marine insurance safeguards against the unpredictable dangers of the maritime environment.
Mortgage Insurance
Mortgage insurance is a type of insurance policy that protects lenders against losses if a borrower defaults on a mortgage loan. There are two main types: Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP). Both types of mortgage insurance allow lenders to offer loans with lower down payment requirements, making homeownership more accessible to borrowers who may not have a large down payment saved.
No-Fault Insurance
Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation. This coverage is not available in all states, — check with us to find out more.
Notice of Loss
A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder's responsibilities after a loss.
Peril
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
Personal Insurance
Property/casualty insurance products that are designed for and bought by individuals to protect their personal assets, including homeowners and automobile policies.
Premium
A premium is the amount of money that an individual or a business must pay to an insurance company in exchange for coverage under an insurance policy. This payment can be made annually, semi-annually, quarterly, or monthly, depending on the terms of the policy.
Product Liability Insurance
Provides coverage for businesses that manufacture, distribute, or sell products to the public. It protects against claims of injury or damage caused by their products.
Professional Liability Insurance
Covers professionals for negligence and errors or omissions that injure their clients.
Property/Casualty Insurance
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners, and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.
Rate
The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.
Renters Insurance
A form of insurance that covers a renter’s belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. Renters insurance provides personal liability coverage for damage the renter or dependents cause to third parties. It provides additional living expenses, known as loss-of-use coverage, if a renter must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.
Risk Management
Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.
Soft Market
A soft market is known as a “buyer’s market.” During a soft market, we see stable premiums, increased capacity, broader terms of coverage, higher available limits of coverage, and competition among insurance companies for new business. During a soft market it is easier to obtain insurance coverage and prices are favorable to the buyer.
Surety Bond
Is a three-party agreement under which one party, the surety company, answers to a second party, the owner, creditor, or “obligee,” for a third party’s debts, default, or nonperformance. Contractors are often required to purchase surety bonds if they are working on public projects. The surety company becomes responsible for carrying out the work or paying for the loss up to the bond “penalty” if the contractor fails to perform.
Surplus Lines
Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.
Term Insurance
A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10, 20, or even 30 years. Term life policies are renewable but premiums increase with age.
Umbrella Insurance
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
Underinsured Motorist Coverage
Auto coverage that pays the difference between the insured’s actual damages for bodily injury and the amount of liability insurance carried by the at-fault driver. Limits usually match liability coverage.
Underwriting
Underwriting is where an insurer evaluates the risks of insuring a potential policyholder. This involves assessing the likelihood and potential cost of claims that the insurer might have to pay in the future. Various factors related to the person or property to be insured, such as health history for life insurance or the condition of a car for auto insurance, are looked at.
Uninsurance Risk
Risks for which it is difficult for someone to get insurance.
Uninsured Motorist Coverage
Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.
Weather Insurance
A type of business interruption insurance that compensates for financial losses caused by adverse weather conditions, such as constant rain on the day scheduled for a major outdoor concert.
Whole Life
Insurance that provides coverage for an individual's whole life, rather than a specified term. The oldest kind of cash value life insurance that combines protection against premature death with a savings account. Premiums are fixed and guaranteed and remain level throughout the policy’s lifetime.
Workers Compensation
Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws, which vary significantly, govern the amount of benefits paid and other compensation provisions.
Yield
This term can refer to the earnings generated by an investment over a specific period, often expressed as a percentage of the initial investment.