Advanco General Insurance Agency

INSURANCE TERMS

At Advanco, we like to encourage and engage our customers to learn more about the various different insurance products as well as the terms associated with them. Therefore, we have taken the time to compile a list of the most common insurance terms and their definitions to better help you understand the sometimes complex world of insurance.

  • Actual Cash Value - Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old sofa will not be replaced at current full value because of a decade of depreciation.
  • Actuary - A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.
  • Additional Insured - A type of position associated with a certain general liability insurance policies that can provide coverage to other individuals, groups, or organizations that were not initially named. Depending on the specific language of the respective additional insured endorsement, the additional insured party can receive some type of protection under the named insurer's policy.
  • Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.
  • Admitted Assets - Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate.
  • Agent - individual who sells and services insurance policies in either of two classifications: First type is an Independent Agent represents at least two insurance companies and (in theory) services clients by searching the market for the most advantageous price for the most coverage. Second type is a Direct, Career, or Captive agent represents only one company and sells only its products and services.
  • Aggregate Limit - Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.
  • Application - A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.
  • Assigned Risk - A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.
  • Automobile Liability Insurance - Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.
  • Binder - A contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.
  • Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.
  • Casualty - Liability or loss resulting from an accident.
  • Casualty Insurance - That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.
  • Certificate of Insurance - A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
  • Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
  • Coinsurance - In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses.
  • Collision Insurance - Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
  • Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.
  • Common Carrier - A business or agency that is available to the public for transportation of persons, goods or messages. Common carriers include trucking companies, bus lines and airlines.
  • Comprehensive Insurance - In auto insurance, is coverage that provides protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield can be covered under comprehensive coverage.
  • Conditions - The part of your insurance policy that states the obligations of the person insured and those of the insurance company.
  • Coverage - The scope of protection provided 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 are listed.
  • Copayment - A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages.
  • Coverage Area - The geographic region covered by travel insurance.
  • Deductible - Amount of loss that the insured pays before the insurance kicks in.
  • Depreciation - Reduction in the value of property due to age and use.
  • Earned Premium - The amount of the premium that has been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
  • Employers Liability Insurance - Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers' compensation law.
  • Encumbrance - A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of the encumbrance.
  • Exclusions - Items or conditions that are not covered by the general insurance contract.
  • Exposure - Measure of vulnerability to loss, usually expressed in dollars or units.
  • Extended Replacement Cost - This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.
  • Floater - A separate policy available to cover the value of goods beyond the coverage of a standard insurance policy including movable property such as jewelry or sports equipment.
  • General Liability Insurance - Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
  • Hazard - A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
  • Hazardous Activity - Includes bungee jumping, scuba diving, horse riding and other activities not generally covered by standard insurance policies.
  • Health Maintenance Organization (HMO) - Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
  • Health Savings Account - Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.
  • Hurricane or Earthquake Deductible - Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane or Earthquake prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from one percent of a home's insured value to 15 percent, depending on many factors that differ by state and insurer.
  • Inflation Protection - An optional property coverage endorsement offered by some insurers that increases the policy's limits of insurance during the policy term to keep pace with inflation.
  • Insurance Adjuster - Is a representative of the insurance company who seeks to determine the extent of the insurer's liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an "as needed" basis and might work for several insurance companies at the same time.
  • Insured - A person or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms.
  • Insurer - The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
  • Lapse - Termination of a policy due to nonpayment of premiums.
  • Liability - Broadly is considered any legally enforceable obligation; term is most commonly used in referring to financial liability.
  • Liability Insurance - Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
  • Licensed - Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies them. The Lloyd's Corp. provides the support facility for their activities.
  • Loss Adjustment Expenses - Expenses incurred to investigate and settle losses.
  • Loss Control - All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A combination of risk control techniques with risk financing techniques forms the nucleus of a risk management program. Loss control includes the use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.
  • Loss Expense - The various expenses including, legal or independent adjuster fees that are paid by an insurance company in settling a claim.
  • Mortgage Insurance Policy - In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.
  • Mutual Insurance Companies - Companies with no capital stock, and owned by policyholders. The earnings of the company--over and above the payments of the losses, operating expenses and reserves--are the property of the policyholders.
  • Named Perils - Perils specifically named and covered on insured property.
  • Negligence - Failure to use a generally acceptable level of care and caution.
  • Occurrence - An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
  • Peril - The cause of a possible loss.
  • Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
  • Point-of-Service Plan - Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.
  • Policy - A written contract of insurance or the certificate including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.
  • Policy Declarations - Also known as the Declarations is the part of the insurance contract that lists basic underwriting information, including the insured's name, address and description of insured locations as well as specific policy coverage and selected limits.
  • Policy Limits - The maximum amount an insurance company will pay out on a particular insurance policy in the event of a covered loss or claim.
  • Policy Period - The amount of time an insurance contract or policy lasts.
  • Preferred Auto - Auto coverage for drivers who have never had an accident and operates vehicles according to law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company would be afraid to take them on as risk.
  • Preferred Provider Organization - Network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.
  • Premium - The price of insurance protection for a specified risk for a specified period of time.
  • Private-Passenger Auto Insurance Policyholder Risk Profile - This refers to the risk profile of auto insurance policyholders and can be divided into three categories: standard, nonstandard and preferred. In the eyes of an insurance company, it is the type of business (or the quality of driver) that the company has chosen to taken on.
  • Proof of Loss - An affirmed statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.
  • Rated Policy - Also known as an extra-risk policy, is an insurance policy issued at a higher than standard premium rate to cover the extra risk; an example would be an insured that has had a DUI (Driving Under the Influence) or other high risk traffic violations.
  • Reinstatement - A process by which an insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium or other reasons.
  • Replacement Cost - The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
  • Rider - An addition to an insurance policy that becomes a part of the contract.
  • Risk - The possibility or chance of loss or injury.
  • Risk Class - Risk class in insurance underwriting is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.
  • Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
  • Salvage - Recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.
  • Settlement - An agreement between a claimant or beneficiary of an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.
  • Standard Auto - Refers to auto insurance for average drivers with relatively few accidents or tickets.
  • Subrogation - The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.
  • Tort - A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
  • Total Loss - A loss that it can be said no value is left or the complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
  • Umbrella Policy - 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.
  • Underwriter - The individual trained in evaluating risks and determining rates and coverage for them.
  • Underwriting - The process of selecting risks for insurance 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.
  • Uninsured Motorist Coverage - Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.