Insurance Definitions



ABANDONMENT: Giving up the proprietary rights
in insured property to the Underwriter in exchange for payment
of a constructive total loss.

ACCIDENT: A fortuitous event, unforeseen and

ACCIDENT INSURANCE: A form of health insurance
against loss by bodily injury.

(also burglary) policy written to protect the insured from financial
loss due to his inability to collect amounts owed him because of
the destruction of his records.

ACT OF GOD: A flood, an earthquake or other accident
or event that is without any human intervention and that could
not have been prevented by reasonable care or foresight but is
the result of natural causes.

ACTUAL CASH VALUE: The sum of money required
to pay for damages or lost property, computed on the basis of replacement
value less its depreciation by obsolescence or general wear.


  1. the insured property is completely destroyed or
  2. the Assured is irretrievably deprived of the insured property
  3. cargo changes in character so that it is no longer the thing
    that was insured or
  4. a ship is posted "missing" at Lloyd’s, in which case
    both the ship and its cargo are deemed to be an actual total

ADDITIONAL INSURED: A person or firm or corporation
other than the named insured on a policy or mortgage company named
in a mortgagee clause, who is protected against loss by the terms
of the policy or mortgage company named in the mortgage clause.

ADJUSTER: An individual representing the insurance
company and acting for the company in working on agreements as
to the amount of a loss and the liability of the company in same.

ADVERSE SELECTION: Selection against the insurance
company; the tendency of more poor risks to buy and maintain insurance
than good risks.

ALL RISK: Insurance against loss or damage to
property arising from any fortuitous cause, except such as may
be specifically excluded.

APPRAISAL: A survey of property made for determining
its insurable value or the amount of loss sustained.

ASSIGNMENT: The passing of beneficial rights
from one party to another.

ASSIGNED RISK: A risk which underwriters do not
care to insure, but because of state law or otherwise, the insured
must be protected and the insurance is therefore handled through
the state and assigned to companies.

ASSUMED LIABILITY: Liability which would not
rest upon a person except that he has accepted responsibility by
contract expressed or implied. This is also known as contractual

AUTOMOBILE FLEET POLICY: A commercial automobile
policy covering five or more automobiles.

AVERAGE: A marine partial loss. This can be particular
average or general average (see below).

AVERAGE CLAUSE: A clause in a marine insurance
policy, whereby partial losses are subject to special conditions
(e.g. a franchise or deductible is to be applied to claims).

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BAILEE: A person or concern having possession
of property committed in trust from the owner.

for loss or or damages to property of bailee’s customers, payable
either to bailees for their account or direct to customers.

BASIC COVERAGE FORM: Any of the commercial or
personal insurance property forms which provide basic coverages.
These forms generally provide the most limited coverage, which
is surpassed by "Broad Forms" and "Special Forms."

BASIC RATE: The manual rate, from which are taken
discounts or to which are added charges to compensate for the individual
circumstances of the risk.

the bailee of goods claims the benefit of any insurance policy
effected by the cargo owner on the goods in care of the bailee.
Such a clause in a contract of carriage, issued in accordance with
the Carriage of Goods by Sea Act, is void at law.

BILL OF LADING: Contract of carriage and receipt
for goods, issued by carrier.

BINDER: (Or Binding Receipt): In lines other
than life and health, a binder is an acknowledgement (usually from
the agent) that insurance applied for is in force whether or not
premium settlement has yet been made or the policy issued. In life
and health insurance, binders are not issued, but if premium settlement
is made with the application, what is often erroneously referred
to as a "binder" is issued. Actually this is a conditional
binding receipt.

BLANKET INSURANCE: (1) Property-liability insurance
that covers more than one type of property in one location in one
policy or form instead of under separate items, or one or more
types of property at more than one location; (2) A contract of
health insurance that covers all of a class of persons not individually

BODILY INJURY LIABILITY: The liability which
may arise from injury or death of another person.

loss due to accidents to boilers, pressure vessels or other machinery
including the equipment itself, as well as liability arising out
of the accident.

BOND: An obligation of the insurance company
to protect one against financial loss caused by acts of another.

BUILDER’S RISK COVERAGE FORM: A commercial property
coverage form specifically designed for buildings in the course
of construction.

BUILDER’S RISK INSURANCE: Insurance against loss
to buildings or structures in the course of construction.

commercial property coverage form designed to insure most types
of commercial property (buildings or contents or both). It is the
most frequently used commercial property form, and has replaced
the General Property Form, Special Building Form, Special Personal
Property Form, and others.

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.

form providing coverage for "indirect losses" resulting
from property damage, such as loss of business income and extra
expenses incurred. It has replaced earlier Business Interruption
and Extra Expense forms.

that pays for loss of earnings when operations are curtailed or
suspended because of property loss.

BUSINESS LIABILITY: The term used to describe
the liability coverages provided by the Businessowners Liability
Coverage Form. It includes liability for bodily injury, property
damage, personal injury, advertising injury, and fire damage.

as "contents," this term actually refers to furniture,
fixtures, equipment, machinery, merchandise, materials, and all
other personal property owned by the insured and used in the insured’s

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C & F: A sale term relating to goods. Cost
and Freight. The consignee makes his own insurance arrangements
for the goods throughout the period of transit.

CARRIER: (1) An insurance company which "carries" the
insurance. (The terms "insurance company" or "insurer" are
preferred because of the possible confusion of "carrier" with
transportation terminology). (2) In transportation, the trucker,
air carrier, ocean steamship company or other entity which moves
the goods. (See "Contract Carrier)

CASUALTY INSURANCE: That type of insurance that
is primarily concerned with losses caused by injuries to persons
and legal liability imposed 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 or forgery,
Boiler and Machinery insurance, and Aviation insurance. Many casualty
companies also write surety business.

CAUSES OF LOSS: Under the latest commercial property
forms, this term replaces the earlier term "perils" insured

CLAIMS-MADE COVERAGE: A policy providing liability
coverage only if a written claim is made during the policy period
or any applicable extended reporting period. For example, a claim
made in the current reporting year could be charged against the
current policy even if the injury or loss occurred many years in
the past. If the policy has a retroactive date, an occurrence prior
to that date is not covered. (Contrast this with "Occurrence

cargo insurance open cover which details the minimum classification
for an overseas carrying vessel that is acceptable to the insurers
for carriage of the insured goods at the premium rate/s agreed
in the contract. Goods carried by lower class vessels are accepted
under the open cover, subject to payment of an additional premium.

COINSURANCE: (1) In property insurance, a clause
under which the insured shares in losses to the extent that he
is underinsured at the time of loss. (2) In health insurance, a
provision that the insured and insurance company will shared covered
losses in agreed proportion. In health insurance, the preferred
term is "percentage participation."

COLLISION COVERAGE: Physical damage protection
for the insured’s own automobile(s) for damage resulting from a
collision with another object or upset.

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," and "Claims
Made," coverage.

COMPREHENSIVE COVERAGE: Traditional name for
physical damage coverage 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

covering a variety of general liability exposures, including Premises
and Operations (OL&T or M&C), Completed Operations, Products
Liability, and Owners and Contractors Protective. Contractual Liability
and Broad Form coverages could be added. In most jurisdictions
the "Comprehensive General Liability Policy" has been
replaced by the newer "Commercial General Liability (CGL)
forms which include all the standard and optional coverages of
the earlier forms.

personal liability contract. It provides personal liability coverage
for the individual and family needs arising out of numerous personal
activities and situations, such as the ownership of residential
property, ownership of pets, sports activities, and many other
everyday activities.

insurance that provides that the insured may renew the contract
to a stated date or an advanced age, subject to the right of the
insurance company to decline renewal only under conditions defined
in the contract.

CONSEQUENTIAL LOSS: A loss arising indirectly
from an insured peril.

CONSTRUCTIVE TOTAL LOSS: A partial loss of sufficient
degree to make the cost of repairing more than the property is

CONTRACT CARRIER: A transportation company which
carries the goods of only certain customers and not the public
in general as in the case of a common carrier.

CONTRACTUAL LIABILITY: Liability assumed under
any contract or agreement. Coverage is generally limited in liability
policies, but in most cases may be provided for an additional premium.

CONTRIBUTION: The term relates to circumstances
where more than one party covers the risk. Each party is deemed
to be liable for his proportion of the loss. If the Assured recovers
in full from one insurer, that insurer is entitled to recover from
the other insurer for that part of the loss which should have been
paid by the latter. The term is used in marine insurance, also,
in relation to contributions paid by the Assured in connection
with salvage and/or general average.

CONTRIBUTORY VALUE: The value on which a contribution
to a general average loss or salvage award is calculated.

COUNTRY DAMAGE: Marine term referring to damage
to baled or bagged goods (e.g. cotton) caused by excessive moisture
from damp ground or exposure to weather, or by grit, dust or sand
forced into the insured property by windstorm or inclement weather.

COVER: (1) A contract of insurance; (2) To effect
insurance; (3) To include within the coverage of a contract of

COVERAGE PART: Any one of the individual commercial
coverage parts that may be attached to a commercial policy.

COVERAGE TRIGGER: A mechanism that determines
whether a policy covers a particular claim for loss. For example,
the difference between the coverage triggers of liability "occurrence" forms
and "claims made" forms is that the loss must occur during
the policy period in the first case and the claim must be made
during the policy period in the second case.

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DEPRECIATION: Decrease in the value of property
over a period of time due to use, wear, tear, and obsolescence.

DIRECT OR HELD COVERED: A condition requiring
that the insured voyage be direct from one place to another. If
the voyage is delayed en route or there is a deviation from the
direct route the insurance cover continues subject to payment of
an additional premium, but only if the Assured gives prompt notice
of such delay or deviation immediately on receipt of advices, unless
the policy provides otherwise.

DISCLOSURE: The duty of the Assured and his broker
to tell the Underwriter every material circumstance before acceptance
of the risk.

DISCOVERY PERIOD: The time allowed the insured
after termination of certain bond and policy provisions to discover
that he has sustained a loss which occurred during the period covered
by the contract.

DUTY OF ASSURED CLAUSE: This appears in the Institute
Cargo Clauses published for use with the MAR form of policy. It
directs the attention of the Assured, his agents, etc. to the duty
(as required by the MIA, 1906) to take reasonable measures to avert
or minimize any loss which is recoverable under the policy; also
to ensure that all rights against carriers and others are properly
preserved and exercised. Underwriters agree to reimburse the Assured
for any reasonable expenditure incurred by his compliance with
the clause; in practice, these expenses are termed "sue and
labor" charges (see Sue & Labor).

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EARNED PREMIUM: That portion of a premium for
which the policy protection has already been given during the now-expired
portion of the policy term.

EFFECTIVE DATE: The date on which an insurance
policy or bond goes into effect, and from which protection is furnished.

type of insurance designed to cover computer equipment, data systems,
information storage media, and expense or income losses related
to EDP losses.

ELIMINATION PERIOD: A loosely-used term sometimes
designating the waiting period and sometimes the probationary period.

common law liability of an employer for accidents to employees,
as distinguished from liability imposed by workers compensation

Liability arising out of the operation of an automobile not owned
by the insured. This frequently results when an employee uses his
own personal car in the business activities of the insured; (2)
Insurance coverage for the liability exposure mentioned above.

ENDORSEMENT: A form attached to the policy bearing
the language necessary to change the terms of the policy to fit
special circumstances.

in the MAR form of policy, whereby Underwriters agree to recognize
judgments only from courts convened within English jurisdiction.
Subscribing Underwriters may agree to replace this clause with
a foreign jurisdiction clause. Please note this is not applicable
to business emanating from the United States of America which is
subject to the Service of Suit Clause (USA) appearing in the Standard

ENGLISH LAW AND PRACTICE: This clause appears
in Institute clauses published for use with the MAR form or policy.
It applies where a foreign jurisdiction clause attaches to the
policy and requires that the foreign court shall base its decisions
on English law and practice.

EXPERIENCE: The loss record of an insured, class
of coverage, or of an insurance company.

EXPOSURE: (1) State of being subject to the possibility
of loss; (2) extent of risk as measured by payroll, gate receipts,
area, or otherwise; (3) possibility of loss to a risk being caused
by its surroundings.

attached to a Standard Fire policy, usually providing coverage
of windstorm, hail, explosion, riot, riot attending civil strike,
aircraft, vehicular damage, smoke and civil commotion.

for making claims after expiration of a "claims made" liability
policy. Also known as a "tail."

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FAS: Incoterm meaning Free Alongside Ship"

FAC: Incoterm meaning "Free Carrier"

FOB: Incoterm meaning "Free On Board"

FPA: Free of Particular Average (see Average
or Particular Average)

FIDELITY BOND: A bond which will reimburse an
employer for loss up to the amount of the bond, sustained by an
employer (the insured) by reason of any dishonest act of an employee
(or employees) covered by the bond.

FIRE: Combustion sufficient to product a spark,
flame or glow and which is hostile (as opposed to friendly – i.e.
not in the place where it is intended to be as in a furnace or

FIRE INSURANCE: (1) Insurance contracts that
indemnify an insured for loss caused by the destruction of the
insured’s property resulting from a fire; (2) The field of insurance
that provides insurance policies on the insured’s property for
a variety of perils, including fire.

FIRST NAMES INSURED: The first named insured
appearing on a commercial policy. The latest forms permit the insurer
to satisfy contractual duties by giving notice to the "first" named
insured rather than requiring notice to all named insureds.

FLOATER POLICY: A policy under the terms of which
protection follows moveable property, covering it wherever it may

FRANCHISE: A provision in freight insurance conditions
which exempts the insurer from particular average losses, in any
one accident, under 3%. The provision is waived if the loss is
caused by fire, or by the ship stranding, sinking or being in collision.

FREIGHT: (1) Goods moved for another or, (2)
The remuneration earned by a shipowner or manager for the carriage
of goods; including the profit derived from carrying his own goods.

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for losses for which the insured is legally liable, caused by fire
or explosion, theft of an entire vehicle, riot and vandalism, collision,
and upset to automobiles in his care, custody and control.

GARAGE LIABILITY POLICY: A liability contract
designed to provide the owner of a garage operation with the liability
protection needed for the special hazards that exist there.

Liability limit that applies to all damages paid for bodily injury,
property damage, personal injury, advertising injury, and medical
expenses, except damages included in the products-completed operations

GENERAL AVERAGE: An Ocean Marine coverage meaning
a partial loss which has resulted from the voluntary and deliberate
sacrifice of some cargo for the benefit of all concerned, and which
must be shared by all parties (owners of ship, cargo and freight)
in proportion to their interest. For example, if 100 containers
were jettisoned from a 1000 container load in order to protect
the ship, the owners of the remaining 900 containers, the owners
of the ship, and the owners of the freight would all contribute
to offset the losses of those whose cargo was jettisoned for the
benefit of the whole.

paid or payable by a saved interest involved in a general average

GENERAL AVERAGE DEPOSIT: Paid by a consignee
to obtain release of the cargo from the carrier following a general
average act. This may be replaced by an Underwriter’s guarantee.

to obtain release of the cargo from the carrier following a general
average act. This may be replaced by an Underwriter’s guarantee.

agreement in a cargo insurance whereby Underwriters do not reduce
a claim for general average contribution in event of underinsurance.

GENERAL EXCLUSION CLAUSE: A clause in the Institute
Cargo Clauses 1982, which specifies risks that are excluded, irrespective
of the risks covered elsewhere in the wording.

GLASS COVERAGE FORM: A commercial property form
used to insure plate glass, lettering, frames and ornamentation.
It has replaced earlier commercial glass insurance forms.

GOOD FAITH: A basic principle of insurance. The
Assured and his broker must disclose and truly represent every
material circumstance to the Underwriter before acceptance of the
risk. A breach of good faith entitles the Underwriter to avoid
the contract. (Proposed changes in law may affect this definition
– also see "Utmost Good Faith".)

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HAZARD: A specific situation that increases the
probability of the occurrence of loss arising from a peril, or
that may influence the extent of the loss. For example, accident,
sickness, fire, flood, liability, explosion are perils. Slippery
floors, unsanitary conditions, shingled roofs, congested traffic,
unguarded premises, and uninspected boilers are Hazards.

HELD COVERED: A provisional acceptance of risk,
subject to confirmation at a later date that the agreed cover is
needed. Where applicable to an existing insurance, cover is conditional,
in practice, on prompt advice to the Underwriter as soon as the
Assured is aware of the circumstances to be held covered coming
into effect, and a reasonable additional premium is payable if
the risk held covered comes into effect.

HIRED AUTOMOBILE: Autos the insured leases, hires,
rents or borrows but not autos owned by employees or members of
their households.

HOLD-HARMLESS AGREEMENT: A contractual arrangement
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. A typical lease may
provide that the lessee must "hold harmless’ the lessor for
any liability from accidents arising out of the premises.

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ICC CLAUSES: (see Institute Cargo Clauses)

INDEMNIFY: To restore the victim of a loss, in
whole or in part, by payment, repair or replacement.

INDEMNITY BOND: A bond which indemnifies the
obligee against loss which arises as a result of failure on the
part of a principal to perform.

INDEPENDENT CONTRACTOR: One who agrees to perform
according to a contract and who is not an employee.

INHERENT VICE: A defect or cause of loss arising
out of the nature of the goods in question.

INLAND MARINE INSURANCE: A branch of the insurance
business which developed from the insuring of shipments which did
not involve ocean voyages. Exposures eligible for this form of
protection are described in the nationwide definition of Marine
Insurance. Such diverse properties as bridges, tunnels, jewelry,
and furs can now be written under Inland Marine forms.

INSTITUTE CARGO CLAUSES: Treaty wordings developed
by the International Chamber of Commerce. There are three basic
sets of these clauses (A, B and C). The A clauses cover "all
risks", subject to specified exclusions. The B and C clauses
cover specified "risks", subject to specified exclusions.
(See actual ICC Clauses wordings via link at right)

INSURABLE RISK: A risk which meets most of the
following requisites: (1) The loss insured against must be defined;
(2) It must be accidental; (3) It must be large enough to cause
hardship to the insured; (4) It must belong to a homogenous group
of risks large enough to make losses predictable; (5) It must not
be subject to the same loss at the same time as a large number
of other risks; (6) The insurance company must be able to determine
a reasonable cost for the insurance; (7) The insurance company
must be able to calculate the chance of loss.

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JOINT LIFE POLICY: Pays the insurance amount
when the first of two or more covered persons dies.

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policy on the life of a key employee whose death would cause the
employer financial loss, owned by and payable to the employer.

KNOWN LOSS: A loss known to one or both parties
when a broker and Underwriter are negotiating a placing.

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LEASE: Contract whereby the owner or user of
property (the lessor) agrees to let another party, (the leasee)
use the property for a consideration (money or rent).

LEASEHOLD INSURANCE: Insurance for the tenant
of a property leased against the loss of value of the lease or
of profit fom a sub-lease through termination of the lease by fire
or other peril insured against.

LIABILITY: Broadly, any legally enforceable obligation.

LIABILITY INSURANCE: That 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.

LIABILITY LIMITS: The sum or sums beyond which
a liability insurance company does not protect the insured on a
liability policy.

LOCATION CLAUSE: Used in cargo open covers this
limits Underwriters’ liability in any one location.

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MALICIOUS DAMAGE CLAUSE: A clause published by
the Institute of London Underwriters for use in a cargo policy
that is subject to the Institute Cargo Clauses (1982) B or C. It
adds the risks of malicious acts, vandalism and sabotage to the
cargo policy.

MANUAL RATES: Usually the published rate for
some unit of insurance. An example is the Workers Compensation
Manual where the rates shown apply to each $100 of the payroll
of the insured, $100 being the unit.

MAR POLICY: A market term for the form of marine
policy used by Lloyd’s and the London company market. It is a basic
contract form to which the conditions agreed by the insurers subscribing
a marine insurance contract are attached.

MARKET VALUE CLAUSE: A provision that may be
used in property damage insurance form covering some risks which
obligates the insurance company, in the event of loss, to pay the
established cash selling price of the destroyed or damaged stock,
rather than the actual case value as provided in the Standard Fire

MINIMUM PREMIUM: The smallest premium which an
insurance company will accept for writing a particular policy or
bond for a designated period.

the owner of a truck against loss to his own property while being
transported. It pays for the loss or damage of cargo for the perils
insured against, regardless of the legal liability.

indemnifies the policyholder, a trucker, for loss or damage resulting
from his legal liability as a carrier while transporting the property
of others. I does not insure against any loss for which he is not
legally liable.

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NAMED INSURED: Any person, firm, or corporation,
or any member thereof, specifically designated by name as insured(s)
in a policy as distinguished from the others who, though unnamed,
are protected under some circumstances.

NAMED PERIL POLICIES: Named Peril Policies specify
what perils are insured against, as opposed to so-called all-risk

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OBLIGEE: Broadly, anyone in whose favor an obligation
runs. This term is most frequently used in surety bonds, where
it refers to the person, firm or corporation protected by the bond.

OBLIGOR: Commonly called principal; one bound
by an obligation. Under a bond, strictly speaking, both the principal
and the surety are obligors.

OCCUPANCY: In insurance, this term refers to
the type and character of the use of property in question.

OCCURRENCE COVERAGE: A policy providing liability
coverage only for injury or loss that occurs during the policy
period, regardless of when the claim is actually made.

OPEN COVER: An agreement whereby the Assured
undertakes to declare every item (e.g. shipment, vessel, etc. as
appropriate) that comes within the scope of the cover in the order
in which the risk attaches. The insurer agrees, at the time of
concluding the contract, to accept all valid declarations up to
the agreed limit for each declaration. An open cover may be for
a fixed period or always open; subject to a cancellation clause.

OVERAGE: An additional premium charged on a cargo
open cover declaration because the carrying vessel is outside the
scope of the classification clause.

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PACKAGE POLICY: An insurance policy including
two or more lines or types of coverages in the same contract.

PARTIAL LOSS: A loss under an insurance policy
which does not either (1) completely destroy or render worthless
the insured property; or (2) exhaust the insurance applying thereto.

PARTICULAR AVERAGE: Accidental partial loss of
the subject matter insured proximately caused by an insured peril.
In a freight at risk policy the term may be applied to a claim
for loss of freight following particular average loss of goods.

PAYROLL AUDIT: An examination of the insured’s
payroll records by a representative of the insurance company to
determine the premium due on a policy.

PERIL: A term used in the Marine Insurance Act
(1906) to denote a hazard. The principle of proximate cause is
applied to an insured peril to determine whether or not a loss
is recoverable. In modern practice the term "risk" often
replaces "peril".

coverage for valuable items such as furs, jewelry, etc. formerly
insured under separate contracts.

covering worldwide except in the insured’s domicile, personal effects
usually carried by a tourist.

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 of a
person’s right to privacy committed other than in the course of
advertising, publishing, broadcasting, publishing, or telecasting.

coverage for third party claims for damages which are other than
physical such as libel, slander, false arrest, etc.

PERSONAL INJURY PROTECTION: The formal name usually
given to no-fault benefits in states that have enacted mandatory
or optional no-fault Automobile Insurance coverages. PIP usually
includes benefits for medical expenses, loss of work income, essential
services, accidental death and funeral expenses.

PERSONAL LINES: This term is used to refer to
insurance for individuals and families such as private passenger
automobile or homeowner insurance.

technique which requires physicians to submit a treatment plan
and an estimated bill prior to providing treatment. This allows
the insurer to evaluate the appropriateness of the procedures,
and lets the insured and the physician know in advance which procedures
are covered and at what rates benefits will be paid.

against claims arising out of the use, handling or consumption
of a product.

to indemnify professionals, doctors, lawyers, architects, etc.
for the loss or expense resulting from claim on account of bodily
injuries because of any malpractice, error or mistake committed
or alleged to have been committed by the insured in his profession.

against liability for damage to the property of another not in
the care, custody and control of the insured, as distinguished
from liability for bodily injury.

PROPERTY INSURANCE: Insurance which indemnifies
a person with an interest in physical property for its loss or
the loss of its income-producing ability.

PROXIMATE CAUSE: The effective cause of loss
or damage. It is an unbroken chain of cause and effect between
the occurrence of an insured peril or a negligent act and resulting
injury or damage.

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QUALIFIED PLAN: A plan under which contributions
by the employer are allowed as a deduction from taxable income,
and which provides that the deposits for his employees, future
benefits are not to be considered as taxable income to them in
the year in which they are made.

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RATING BUREAU: An organization that classifies
and promulgates and in some cases compiles data and measures hazards
of individual risks in terms of rates in a given territory.

RECOVERY: Amount recovered from a third party
responsible for a loss on which a claim has been paid.

REIMBURSEMENT: Payment of an amount of money
related to the amount of loss to or on behalf of the insured upon
the occurrence of a defined loss.

REINSTATEMENT: (1) Putting a lapsed policy back
in force; (2) The payment of a claim under some forms of insurance
reduces the principal amount of the policy by the amount of the
claim. Provision is usually made for a method of reinstating the
policy to its original amount.

REINSURANCE: (1) A contract of indemnity against
liability by which the insurance company procures another insurance
to insure against loss or liability by reason of the original insurance;
(2) Insurance by one insurance company of all or part of a risk
accepted by it with another insurance company which agrees to reimburse
the insurance company for the portion of the claim insured.

REPLACEMENT CLAUSE: A clause limiting Underwriters’
liability for damage to machinery cargo.

REPLACEMENT COST: The cost of replacing property
without deduction for depreciation.

REPORTING FORM: Fire or other direct damage insurance
written under a form of policy that covers fluctuating values of
stocks of merchandise, furniture and fixtures and improvements
by means of periodic reports submitted to the insurance company
by the insured, with an annual adjustment of premium on the average

RETROACTIVE DATE: Date on a "claims made" liability
policy which triggers the beginning of insurance coverage. A retroactive
date is not required. If one is shown on a policy, any claim made
during the policy period will not be covered if the loss occurred
before the retroactive date.

RISK: A fortuity. It does not embrace inevitable
loss. The term is used to define causes of loss covered by a policy.

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SALVAGE: (1) Property taken over by an insurance
company to reduce its loss; (2) Award recoverable by salvors under
maritime law.

SALVAGE CHARGES: The award due to a salvor for
services rendered in saving the insured property.

SALVAGE LOSS: Occurs when the Underwriter agrees
to settle a cargo claim by paying the difference between the insured
value and the proceeds realised by selling the damaged goods.

SCHEDULE: (1) A list of specified amounts payable
for, usually, surgical procedures, dismemberments, ancillary expenses
or the like in Health Insurance policies; (2) The list of individual
items covered under one policy as the various buildings or animals
and other property in property insurance; (3) In Marine policies,
a list attached to a slip, open cover, policy or other document,
usually detailing the rates of premium for various voyages, interests
and risks.

SEAWORTHINESS WARRANTY: There is an implied warranty
in every voyage policy that the ship must be seaworthy at the commencement
of the insured voyage or, if the voyage is carried out in stages,
at the commencement of each stage of the voyage. To be seaworthy,
the ship must be reasonably fit in all respects to encounter the
ordinary perils of the contemplated voyage, property crewed, fuelled
and provisioned, and with all her equipment in proper working order.
Cargo policies waive breach of the warranty, except where the Assured
or their servants are privy to the unseaworthiness. Breach of the
warranty is not excused in a hull voyage policy, literal compliance
therewith being required. Although there is no warranty of seaworthiness
in a hull time policy, claims arising from unseaworthiness may
be prejudiced if the ship sails in an unseaworthy condition with
the knowledge of the Assured.

SECURITY: The Underwriters subscribing a risk.
The Insurers.

STOP LOSS: (1) Any provision in a policy designed
to cut off the insurance company’s loss at a given point. Aggregate
benefits and maximum benefits are an example; (2) A type of reinsurance
designed to transfer the loss from the ceding company to the reinsurer
at a given point.

SUBROGATION: The legal process by which an insurance
company seeks from a third party who may have caused the loss,
recovery of the amount paid to the insured.

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.

SUE AND LABOR: Expenses incurred by the Assured
or their representatives with the intention of preventing or minimizing
a loss for which the Underwriter would have been liable. They do
not include expenses incurred in general average or salvage acts;
these being recoverable under the policy only as part of the Underwriters’
liability for contribution to general average or salvage, if any.
Sue and labor charges are recoverable under a policy that incorporates
a sue and labou clause (SG policy), or in accordance with the wording
of the policy (e.g. under the "duty of the Assured" clause
attached to a MAR policy).

SURETY: (1) A term loosely used to describe the
business or suretyship or bonds. Suretyship is an arrangement whereby
one party becomes answerable to a third party for the acts of neglect
of a second party; (2) The party in a surety arrangement who holds
himself responsible to one person for the acts of another.

SURETY BOND: A bond in which the surety agrees
to answer to the obligee for the non-performance of the principal
(known as the obligor).

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TAIL: This term has been used to describe both
the exposure that exists after expiration of a policy and the coverage
that may be purchased to cover that exposure. One "occurrence" forms
a claims tail may extend for years after policy expiration, and
the losses may be covered. On "claims made" forms tail
coverage may be purchased to extend the period for reporting covered
claims beyond the normal policy period.

TO PAY AS CARGO: Used in an ancillary insurances
relating to the cargo (e.g. increased value) when the Assured is
not required to show evidence of loss or interest and can claim
on the policy if he can show that a corresponding loss has been
settled on the main cargo policy.

TOTAL LOSS: This can be actual total loss or
constructive total loss.

TRANSIT CLAUSE: A clause in the Institute Cargo
Clauses, specifying the attachment and termination of cover.


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designed to provide liability protection above and beyond that
provided by standard liability contracts.

UNDER-INSURANCE: A condition in which not enough
insurance is carried to cover the insurable value, and, especially,
to satisfy a coinsurance clause.

UNDERWRITER: (1) A person trained in evaluating
risks and determining the rates and coverages that will be used
for them; (2) An agent, especially a life insurance agent, who
might qualify as a "field underwriter."

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Marine or burglary insurance coverage providing for the replacement
of valuable papers, records and forms.

VOID POLICY: One which is inadmissible as evidence
in a court of law (e.g. P.P.I. policy).

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WAITING PERIOD: A period of time between the
beginning of a disability and the date benefits begin.

WAIVER CLAUSE: A clause which entitles both Underwriter
and Assured to take measures to prevent or reduce loss without
prejudice to the rights of either party.

WARRANTY: A statement made on an application
for insurance that is warranted to be true in all respects. If
untrue in any respect, even though the untruth may not have been
known to the person giving the warranty, the contract may be voided
whether or not the untruth or inexactness is material to the risk.

WATERBORNE AGREEMENT: A market understanding
whereby Underwriters cover goods against war risks only whilst
they are on the overseas vessel. This rule is relaxed only in the
case of goods in a transhipping port for a short period awaiting
onward carriage.

insurance policy, whereby the Underwriters forgo their subrogation
rights. A policy incorporating such a term is deemed to be a gambling
policy in law, and is therefore invalid in a court of law.

WITHOUT PREJUDICE: The claim is paid on this
occasion, although the Underwriter feels it does not attach to
the policy, but this action must not be treated as a precedent
for future similar claims.

WORKERS COMPENSATION: (1) A schedule of benefits
payable to an employee for injury, disability, dismemberment, or
death as a result of occupational hazard. The payments are a liability
of an employer. (2) Insurance agreeing to pay the Workers Compensation
benefits required by law on behalf of the employer.

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