Insurance Glossary & Definitions
One of the biggest hurdles when researching insurance options is understanding the jargon used in the industry. We don’t blame you – even our own team must go through a rigorous training process and receive ongoing education to stay in the loop on the latest verbiage!
We created the LG Insurance Glossary to help you decipher some of the most abstract and important terms you might come across when searching for insurance. Don’t see what you’re looking for? Shoot us a note and we’d be happy to explain any other concepts to you!
The LG Insurance Glossary
ACCOUNTS RECEIVABLE: Provides coverage for sums due from customers that you are unable to collect due to damage to your records, plus additional expenses related to reconstructing your records.
ACORD: The Association for Cooperative Operations Research and Development which creates and promotes paper and electronic insurance form standards to facilitate Electronic Data Interchange.
ADDITIONAL INSUREDS: Extends liability policy protection to include those listed on the form, such as Vendors, Managers of Premises and others.
ADHESION CONTRACT: Refers to a contract written by one party (e.g. insurance company) while the other party (insured) merely follows (adheres) to it. The contract usually favors the party that wrote it. Note: where the parties disagree over the meaning of part or all of the contract, judgment is typically made in the adhering party’s favor.
ANIMAL BAILEE/BAILEE CUSTOMER GOODS: Covers animals/property in the insured’s custody.
BLANKET BUSINESS PERSONAL PROPERTY: Combines BPP limits at all locations into a single BPP limit.
BREACH OF CONTRACT: When one party fails to perform their part of an agreement.
BROADENED WIND: Provides coverage for damage to building interior or business personal property for loss due to wind even if the building exterior is not first damaged.
BUILDERS RISK: Provides coverage for materials, supplies, machinery, and equipment at installation sites, at a temporary storage location or in transit.
BUILDING: Structures at the premises described in the Declarations, including permanently installed machinery and equipment.
BUSINESS INCOME: Covers Net income and continuing normal operating expenses, including payroll, during suspension of your operations.
BUSINESS INCOME-DEPENDANT PROPERTY: Covers loss of business income during suspension of your operations due to damage at a property operated by another whom you depend on to deliver materials or services, accept your products or services, manufacture products for delivery to your customers or attract customers to your business.
BUSINESS INCOME-INTERRUPTION OF PRACTICE: Provides a daily limit option for your business income losses of 15 days or less in lieu of the actual loss sustained valuation.
BUSINESS PERSONAL PROPERTY: Property that you own or lease for use in your business, including property of others that is in your care, custody, or control.
BY-LAWS: Rules, guides or procedures adopted by an association or organization to facilitate its operation.
CITATION: A court order to perform a specified act or to make an appearance to answer charges. Citations typically involve minor offenses such as traffic tickets. Arrest warrants may be issued when a citation is not obeyed.
COASTAL BARRIERS: Landscape features such as fringing mangroves, tombolos, barrier islands, barrier spits, and bay barriers which protect the mainland, lagoons, wetlands and salt marshes from the damaging effects of full force wind, wave and tidal energy. These areas frequently attract land development for resort and recreational use because of their climate and natural beauty.
COMPUTER FRAUD: Provides coverage for the theft of money, securities or other property by the fraudulent transfer of possession of that property by means of a computer.
COLLUSION: Refers to two or more parties making a secret agreement to deceive another party, a court or to circumvent the law. An example would be a policyholder and a “claimant” faking a claim to get (and share) the insurance proceeds.
CUSTOMERS PROPERTY: Removes exclusions for damage from marring and scratching, repair and maintenance of customers’ property at their premises, while in your care, custody or control.
DECLARATIONS PAGE: The policy coverage page that summarizes the coverage provided by the policy and includes the identifying information on the insured and the covered property as supplied by the policy application. Note that the definition says that the declarations must be computer-generated, which must mean that handwritten or typed declarations would not qualify as declaration pages.
DEFAMATION: An attack on the good reputation of a person either verbally (slander) or in writing (libel).
EASEMENT: Generally refers to a right of way over a property owner’s land. Commonly held by a utility company for servicing utility lines. It may also refer to a wide variety of ways that one party may have access to another’s land or property.
ELECTRONIC DATA PROCESSING: Covers Electronic Data Processing Equipment and Electronic Media and Data. Special causes of loss and additional exclusions may apply.
EMPLOYEE BENEFITS LIABILITY: Provides coverage for acts, errors or omissions committed in the administration of employee benefit plans, including group life insurance, group health insurance, profit sharing plans, unemployment insurance, social security benefits, workers’ compensation and disability benefits.
EMPLOYEE DISHONESTY: Covers dishonest acts, committed by one or more employees, with intent to cause you loss and obtain financial benefit for the employee or another party.
EMPLOYMENT PRACTICES LIABILITY: Protects against loss arising from employment practice disputes such as discrimination, sexual harassment, wrongful termination, breach of employment contract and wrongful discipline.
ENHANCED REPLACEMENT COST: Provides for increased settlement with regard to a property loss and building coverage.
ESCROW: When a third party holds money, shares or a deed in trust until a contractual obligation is fulfilled between two parties.
EQUIPMENT BREAKDOWN: Covers failure or pressure or vacuum equipment, mechanical failure and electrical failure that causes physical damage to covered equipment.
ELEVATION CERTIFICATE: A document provided by a certified Surveyor showing actual elevation measurements taken on-site. This document is a requirement when applying for a LOMA or LOMR.
FELLOW EMPLOYEE SUITS: Provides coverage for bodily injury to an employee caused by an employee.
FEMA: Acronym for Federal Emergency Management Agency, a federal agency which oversees the National Flood Insurance Program.
FIDUCIARY LIABILITY: Protects fiduciaries, as defined by ERISA, against against loss arising from the administration and management of employee benefit and pension plans such as negligent advice or careless plan management.
FINE ARTS: Paintings, etching, pictures, tapestries, art glass windows, valuable rugs, statuary, marbles, bronzes, antique furniture, rare books, antique silver, porcelains, rare glass, bric-a-brac, and similar property with historic value or artistic merit.
FOOD CONTAMINATION COVERAGE: This option provides coverage for loss of food due to contamination, including the expense to clean the equipment as required by the Board of Health or any other governmental authority, the cost to replace the food which is, or is suspected to be, contaminated, the expense to provide necessary medical tests or vaccinations for infected employees. However, it will not pay for any expense that is otherwise covered under a Workers’ Compensation Policy; and additional advertising expenses incurred to restore the insured’s reputation.
GARAGEKEEPERS LIABILITY: Provides coverage for loss to a customer’s auto while the insured is attending, servicing, repairing, parking or storing it in your garage operations.
GENERAL LIABILITY: Provides coverage for bodily injury, property damage, personal and advertising injury and medical payments.
GOODWILL: An intangible business asset consisting of a business positive reputation with its customers and general public.
INFLATION GUARD: This modifies the property form to include coverage adjustments due to the impact of inflation. It applies to both Building and Business Personal Property.
INSTALLATION FLOATER: Provides coverage for materials, supplies, machinery and equipment at installation sites on an actual cash value basis.
LETTER OF MAP REVISION (LOMR): An official revision to the current effective FEMA map. It is used to change flood zones, floodplain and floodway delineations, flood elevations, and other features. A LOMR is usually followed by a physical map revision.
LIQUOR LIABILITY: Provides coverage for bodily injury and property damage arising out of the selling, serving or furnishing or any alcoholic beverage.
LOSS ASSESSMENT: Provides coverage for loss assessed by condominium associations.
LITIGATION: A dispute that is brought to court as a lawsuit.
MANUFACTURERS & WHOLESALERS SELLING PRICE: Provides for loss settlement for stock held for sale by manufacturers and wholesalers.
ORDINANCE OR LAW: Adds coverage to the property form to provide coverage for increased construction costs associated with compliance with an ordinance or law after a covered loss.
POWER OF ATTORNEY: One party who has a document which assigns him the right to make legally binding decisions for another party. The scope of decision-making authority may be narrow or broad.
PRODUCT RECALL & REPLACEMENT: Provides coverage for errors in design and manufacture of products. Applies to costa or media notices, shipping and disposal or recalled products and distribution of replacement products.
REIMBURSEMENT OF LEGAL EXPENSES-DISPOSAL OF MEDICAL WASTE: Provides coverage for reimbursement of legal expenses resulting from a lawsuit alleging violation of a law or regulation governing disposal of medical waste.
SCHEDULED PROPERTY: Provides coverage for specific categories of business personal property listed below, when there is a need or desire by the client to schedule property due to a more mobile nature of the exposure of the property: 1. Personal property floater; 2. Mobile/cell phones, beepers, pagers; 3. Athletic, equestrian, funeral, scouting; 4. Lodge, club, church; 5. Catering; 6. Musical instruments; 7. Cameras, projection machines, film & related equipment and accessories.
SEASONAL INCREASE: Provides coverage for increased Business Personal Property loss due to the seasonality of the business.
SPOILAGE COVERAGE: Provides coverage for loss or damage from breakdown, contamination, or power outage to perishable stock whether owner or in the insured’s care, custody or control.
UTILITY SERVICES-DIRECT DAMAGE: Provides coverage for direct damage to the insured’s property due to a covered loss to water supply services, communication supply services or power supply services.
UTILITY SERVICES-TIME ELEMENT- Provides coverage for business income loss due to a covered loss to water supply services, communication supply services or power supply services.
VACANCY PERMIT: This option suspends the vacancy language of the policy to allow coverage to apply for a specified period of time.
VALUABLE PAPERS & RECORDS: Inscribed, printed or written documents, manuscripts and records, including abstracts, books, deeds, drawings, films, maps, or mortgages.
WAITING PERIOD: The time between the a flood insurance application date and the policy effective date.
WATERCRAFT BUSINESS LIABILITY: Provides liability coverage for owned watercraft, private pleasure type watercraft, less than 51 feet in length.
WELFARE & PENSION PLAN COVERAGE: Provides coverage for employers to meet Employee Retirement Income Security Act (ERISA) compliance standards.
ZONING: Refers to the legislative division of a town/city into certain districts including the regulations that govern each area such as the type and characteristic of construction and/or the type of occupancies (residential, commercial or mixed) permitted.
Top Policies for Every Business Owner!
1. General Liability Insurance: Every business, even if home-based, needs to have liability insurance. The policy provides both defense and damages if you, your employees or your products or services cause or are alleged to have caused Bodily Injury or Property Damage to a third party.
2. Property Insurance: If you own your building or have business personal property, including office equipment, computers, inventory or tools you should consider purchasing a policy that will protect you if you have a fire, vandalism, theft, smoke damage etc. You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate.
3. Business owner’s policy (BOP): A business owner policy packages all required coverage a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.
4. Commercial Auto Insurance: Commercial auto insurance protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions. If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Many times the non-owned can be added to the BOP policy.
5. Worker’s Compensation: provides insurance to employees who are injured on the job. This type of insurance provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his rights to sue his employer for the incident. As a business owner, it is very important to have worker’s compensation insurance because it protects yourself and your company from legal complications. State laws will vary, but all require you to have workers compensation if you have W2 employees. Penalties for non-compliance can be very stiff.
6. Professional Liability Insurance: this type of insurance is also known as Errors and Omissions Insurance. The policy provides defense and damages for failure to or improperly rendering professional services. Your general liability policy does not provide this protection, so it is important to understand the difference. Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons and technology providers to name a few..
7. Directors and Officers Insurance: this type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.
8. Data Breach: If the business stores sensitive or non-public information about employees or clients on their computers, servers or in paper files they are responsible for protecting that information. If a breach occurs either electronically or from a paper file a Data Breach policy will provide protection against the loss.
9. Homeowner’s Insurance: Homeowner’s insurance is one of the most important kinds of insurance you need. This type of insurance can protect against damage to the home and against damage to items inside the home. Additionally, this type of insurance may protect you from accidents that happen at home or may have occurred due to actions of your own.
10. Renter’s Insurance: Renter’s insurance is a sub-set of homeowner’s insurance which applies only to those whose who rent their home. The coverage is protects against damage to the physical property, contents of the property, and personal injury within the home.
11. Life Insurance: Life insurance protects an individual against death. If you have life insurance, the insurer pays a certain amount of money to a beneficiary upon your death. You pay a premium in exchange for the payment of benefits to the beneficiary. This type of insurance is very important because it allows for peace of mind. Having life insurance allows you to know that your loved ones will not be burdened financially upon your death.
12. Personal Automobile Insurance: Another very important type of insurance is auto insurance. Automobile insurance covers all road vehicles (trucks, cars, motorcycles, etc.). Auto insurance has a dual function, protecting against both physical damage and bodily injury resulting from a crash, and also any liability that might rise from the collision.
Alternate Insurance Definitions direct from AM Best
Auto Insurance- Automobile Insurance is the most bought insurance in the United States. Different coverages can be purchased based on the needs of the insured.
Workers’ Compensation- Workers Compensation Insurance is a system in which employers provide insurance- and the payment of lost wages- for employees in the case of injury, disability or death resulting from a workplace hazard.
Liability Insurance- Liability Insurance coverage protects against legal liability resulting from negligence, carelessness or a failure to act causing property damage or personal injury to others.
Commercial Package Policy- These commercial policies package two or more insurance coverages protecting a business from various property and liability risk exposures, such as physical assets of a business and the actions of the owners or employees.
Farmowners- Farm Insurance Policies are similar to homeowners insurance policies in that they cover against homes, barns, stables and other farm structures.
Inland Marine- Inland Marine insurance was developed for shipments that are transported over the land, not in the ocean. This Insurance covers articles in transit by all forms of land and Air.
Ocean Marine- Ocean Marine insurance covers property damage to vessels and watercraft including cargo. There is a major exclusion for war and terrorism.
Medical Professional Liability- Medical Malpractice is professional liability coverage for physicians and medical professionals against lawsuits alleging negligence or errors and omissions during the care of patients.
Surety- Surety Bonds are an insurance that guarantee that a principal will perform a specific obligation and are contractually based.
Fire Insurance- Fire Insurance protects property against losses caused by fire or lightening and may be included in homeowners or commercial insurance policies.
Allied Lines- Allied Lines of insurance work with dire insurance to cover wind, rain, vandalism and other perils.
Earthquake- Earthquakes are not covered by homeowners insurance or business owners insurance, coverage must be purchased separately. Earthquake coverage covers direct damage to property resulting from an earthquake or volcano, but excludes explosion, floor or tsunami that typically follow an earthquake.
Flood- Flood Insurance is not covered under your homeowners or business insurance policy. Flood insurance must be purchased directly from the National Flood Insurance Program (NFIP) through your local agent. A Flood is water covering two or more properties.
Fidelity- A Fidelity Bond is coverage created to cover commercial businesses and financial establishments for losses of monies or stock through acts of employee dishonesty. Fidelity coverage can also cover internet transactions.
Product Liability- Product Liability Insurance is coverage of liability that parties along the supply chain of a product from the manufacturer to the store owners. This covers the parties is a product has a defect and injures a third party or causes property damage.
Burglary and Theft- This insurance covers theft or damage to property by a person who unlawfully enters or exits the premises. This is a standard coverage within homeowners and business owners policies.
Aircraft- Commercial Airlines Property Insurance covers the hulls and instruments of an airplane and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground or in the air.
Boiler and Machinery- These policies also know as Equipment Breakdown Insurance protects against sudden or accidental breakdown of Heating, cooling, production and electrical machinery.