Key policy terms are defined below that you will find throughout your policies as well as when speaking with your agent. Use the quick links to jump to words alphabetically.

We also have many words translated into Spanish for reference. 
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A.M. Best

A.M. Best is a rating agency that issues financial strength ratings measuring insurance companies’ ability to pay claims. It also rates financial instruments issued by insurance companies, such as bonds. See “About Us” on to review our A.M. Best rating.


An event or occurrence that is unintended, unforeseen, and unexpected; something which could not be considered as a foreseeable occurrence and consequence of an undertaking; a casualty or mishap.

Act of God

An event beyond human origin or control. Lightning, windstorms, and earthquakes are examples, the damage from which would not be the responsibility of an insured, although the insured might be responsible for many other calamities. Acts of God are excluded under certain liability insurance policies.

Actual Cash Value (ACV)

The cost to repair or replace damaged property, less a deduction for depreciation based on the property’s age and condition at the time the damage occurred

Additional Insured (A/I)

An entity or individual that has a business relationship with a Policyholder’s operation or property, and is named by the Insurance Company to receive limited coverage under the Policyholder’s insurance policy.

Additional Named Insured

A party, other than the first named insured, that has been shown as an insured in the policy Declarations or in an addendum to the policy Declarations or by endorsement once the policy has been issued. This party has the status of named insured.

Additional Premium (AP)

A premium payable by the Policyholder as a result of a policy change that occurred after the policy was issued.


One who determines the amount of loss suffered. A “company” adjuster represents the company. A “public” adjuster represents the policyholder. An “independent” adjuster may be hired by either.

Adverse Selection

The insuring of one or more risks with a higher chance of loss than that contemplated by the applicable insurance rate. The selection of such risks is adverse because the rate is inadequate. Also called anti-selection.


The business entity or person that is authorized by an individual to secure insurance coverage on their behalf. Most commonly, the Agent is the individual or company (seen on our web site as “Your Local Agent”) who secures insurance coverage for the Policyholder.

Agent of Record

The agent who has been recognized by the insured or customer as his or her authorized representative for handling the specified insurance transactions.

Aggregate (Limit)

The limit that designates the most an insurance company will pay during a policy term, regardless of the number of claims that occur during the policy term.

All-Risk Policy

A policy that covers loss caused by any cause of loss which is not excluded, as contrasted to "named peril" policies which protect against certain perils named in the policies. Usual to certain types of property and marine insurance contracts, the term "all risk" frequently appears in quotes, since such coverage includes "almost" all risks (i.e., all but those excluded).

Alternative Dispute Resolution

Refers to alternative methods used to settle claims that avoid litigation. Mediation and arbitration are two frequently used methods.

Anniversary Date

The anniversary date of policy inception as listed in the policy Declarations, and each subsequent expiration and renewal.

Appellate Courts

These courts hear cases in which one party to a dispute wants to challenge the decision of a trial court. Appellate courts hear no new evidence. They base their decision on evidence presented at the trial court.


An insurance form a potential policyholder fills out. Based on the form, the insurance company decides whether or not to insure the applicant, modify the coverage offered, or decline to cover the applicant.


The process by which an insurance company authorizes an agent to act on that company's behalf.


A process in which the parties in a dispute agree to submit their controversy to a private body that will make a decision that can be final and binding. One of the methods used in Alternative Dispute Resolution.

At-Will Employment

Describes a common situation in which a worker is employed at the will of the employer and the employee may be fired for any reason unless the reason would violate state or federal law (such as the Americans with Disabilities Act).

Audit Policies

These are the types of policies that the insurer has the right to audit or examine at the end of each policy term, to determine if the premium charged was adequate based on the actual final exposure experienced by that insured.


An audit is an accounting report that verifies information upon which the price of certain types of policies are based. They can occur before the policy is issued or at the expiration of a policy.


Bad faith

An allegation that an insurer has failed to settle a claim within its policy limits when the opportunity existed or has dealt with another party without regard to fairness or reasonableness.


Amount of premium and fees remaining to be paid for a particular policy.

Bench Trial

Trial that a judge hears without a jury.


An oral or written agreement to provide insurance which serves as evidence of coverage prior to the issuance of a policy. It is often considered to be a temporary insurance policy to provide coverage until a permanent policy has been issued.

Bodily Injury

Injury, sickness or disease sustained by a person, including death at any time resulting therefrom.

Broker of Record (BOR)

The insurance agent or wholesaler broker who has been designated by a policyholder to place coverage on their behalf.

Business Income and Extra Expense

When a business suffers a property loss, it may also result in the business operation stopping, which, in turn, results in loss of business income for a period of time needed to repair the property and start operating the business again. This loss of income during the time the operation is stopped can be insured, covering the loss of income, and any extra expense the business may pay to keep the operation going at another location, etc.



This is when an insurance company or a policyholder ends an insurance policy according to contract provisions or by mutual agreement.


A company that sells insurance (also called an insurer).

Civil Law

Laws that protect individuals’ private rights and are designed to remedy a wrong through compensation or restitution.


The formal request by a policyholder or a claimant for payment of loss under an insurance policy. The final amount made in payment of a covered loss.


A liability insurance method covering losses from claims asserted against the insured during the policy period, regardless of whether the liability-imposing causes occurred during or prior to the policy period. (However, many underwriters may not cover liability-imposing causes occurring prior to the policy period.) The coverage trigger is based on the retroactive date stated in the Declarations.

Claims-Made Trigger

In order to trigger coverage in a claims-made liability policy, a claim must be made against the insured during the policy period and the injury or damage alleged in the claim must not have occurred prior to the retroactive date specified in the policy Declarations.


Language in a policy that describes, limits or modifies coverage granted.


In property insurance, a condition of the policy requiring the insured to maintain insurance at least equal to a stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, a penalty is applied to the amount of loss based on a proportionate formula of the amount of insurance carried divided by the amount of insurance required to be carried.

Collateral Source Rule

A plaintiff’s recovery cannot be reduced by payments or benefits from other sources. This rule prevents the defendant from benefiting from any payments or benefits received by the claimant.

Combined Ratio

The addition of the ratio of losses incurred to earned premiums, and the ratio of underwriting expenses to written premiums.

Combined Single Limit (CSL)

CSL is a single number that describes the predetermined limit for the combined total of the Bodily Injury Liability coverage and Property Damage Liability coverage per occurrence or accident.


Example: A CSL of $1 million pays up to a combined total of $1 million for both Bodily Injury Liability coverage and Property Damage Liability coverage for any single accident.


This is the portion of the premium the agent or broker keeps as compensation for sales, service, and distribution of insurance policies.

Common Law

Body of the law that has developed over time through the decisions of judges.

Comparative Negligence

If the injured party’s own negligence contributed to the loss, the damages he or she may recover are reduced in proportion to the percentage of his or her negligence.

Comprehensive Personal Liability Policy (CPL)

This is a personal liability contract that provides liability insurance coverage for individual and family needs that may arise due to personal activities and situations, such as residential property ownership, pet ownership, sports activities, and many other everyday activities.


In legal terms, it is the inducement to a contract or the promises made. It may be either express or implied. The insurance policy is a common example. The consideration provided by the insured is the premium dollar, and the consideration of the insurer is a promise to pay should loss, accident or injury occur. If a loss does not occur, nothing is paid by the insurer. Should there be a loss, however, the amount of coverage provided by the insurer may exceed the lifetime accumulation of premiums paid by the insured.

Contributory Negligence

Common law principle stating that if an injured party’s own negligence contributed to their loss, the injured party cannot collect any damages from the other responsible parties.


A corporation is created to function as a separate legal and tax entity, independent of the people who own and manage it. It can enter agreements, incur debts and be taxed apart from its owners. A corporation is required to file articles of incorporation with its home state, create corporate by-laws, issue stock certificates and comply with a number of corporate formalities.


A party that is confronted by a legal action responds by filing a separate action, alleging a different set of circumstances.


The extent of insurance protection afforded by a policy of insurance.

Coverage Trigger

The event which determines when coverage of a liability policy applies. In an "occurrence" policy, the event is the occurrence of the injury or damage. In a "claims-made" policy, the event is the notification to the insurer or the insured, whichever comes first, of the happening of the injury or damage.

Criminal Law

Laws that protect public interests by governing how suspects are investigated, charged, tried and punished.


Claim brought against one co-defendant by another co-defendant.



In liability insurance, refers to awards, which can be either compensatory or punitive. Compensatory consists of either general damages, which include pain and suffering, or special damages, which are out-of–pocket expenses. Punitive (or exemplary) are amounts that are awarded as a form of punishment or to act as an example.

Declaration Page (Dec Page)

With respect to property and liability insurance, the portion of the insurance policy itself, used to detail the name and address of the insured, the locations covered, the policy period, limits of insurance, endorsements attached and premiums for coverage. Commercial policies also contain such items as the type of entity and type of operation of the insured.


The amount of the loss that the Policyholder must pay before the insurance company will begin paying.

Default Judgment

A final court decision automatically deciding in favor of one party. It might result from the defaulted party’s failure to file an answer to a summons and complaint or from a failure to appear in court at a specific time.

Defense Clause

A provision in commercial and personal liability insurance policies whereby the insurer has the right and duty to defend a lawsuit against the insured, even when those suits are considered false, groundless or fraudulent.


The recorded and transcribed testimony of a witness obtained through oral questions or written interrogatories that is used in preparation for a lawsuit.

Direct Billing

A system for the collection of premiums where the insurance company sends a notice to the insured for the premium in lieu of the conventional collection of premiums by the agent. The company sends a statement to the agent, usually monthly, recording the premiums collected direct, and credits the agent with commission due on those items.

Directors and Officers Liability

Provides coverage for directors and officers of corporations and the corporation, itself, against claims alleging financial loss arising from mismanagement by the board of directors or by individual directors.


The exchange of all relevant information between the plaintiff and defendant before the trial.

Doing Business As (DBA) name

A DBA is a name by which a company is known to the public but which is not its legal name.

Dram Shop Laws

The laws will vary by state, but for the most part, the owner or operator of an establishment serving or providing alcoholic beverages is liable for injury or damages caused by or to an intoxicated customer, if it can be established that the owner or operator caused or contributed to the intoxication of the person through the sale of alcoholic beverages. These laws are sometimes called liquor liability laws.


Earned Premium

The portion of the policy premium allocated to the expired or used portion of the policy term. This also includes any short-rate charge made on policy cancellation.



Electronic Funds Transfer (EFT)

EFT is a payment method in which funds are automatically deducted from a checking account to pay bills on a regularly scheduled basis. Policyholders must select the EFT payment method and authorize payments in advance to use this system to pay their bills.

Employee Retirement Income Security Act (ERISA)

This act is sometimes called the "pension reform act." One of the purposes of this act is to force employers to protect the assets of the business that have been designated as employee pension benefits.



Employment Practices Liability

This type of coverage helps business owners defend against employment-related claims, such as sexual harassment, age discrimination, or wrongful termination.


A document with language attached to and becoming part of a basic policy for the purpose of modifying the policy, either at inception or mid-term. The term endorsement is usually associated with property and casualty policies while the term rider is normally used with life, accident and health contracts.

Equipment Breakdown

A form of property coverage covering the cost to repair broken mechanical systems, such as boilers, heating and air conditioning systems and electrical systems

Errors and Omissions Liability

A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others.


Prevents a party from asserting a right that has already been waived.

Excess Liability Insurance

Liability insurance designed to provide an extra layer of coverage above the primary layer. The excess insurance does not respond, however, until the limits of liability in the primary layer have been exhausted. Because of the method of response, it is often much less costly than the primary layer, per $1,000,000 of coverage. The excess layer provides not only higher limits, but catastrophic protection for very large losses.


The peril, hazard, condition or circumstance that is not covered by the insurance and is so stated in the policy. A clause in an insurance policy which specifies what is excluded from the policy's coverage.



Expiration (Date)

The date on which coverage under the policy ceases. Most policies expire just after midnight at 12:01 a.m. on the policy expiration date.

Extra Contractual Damages

Damages not anticipated by the policy that result from a breach of the policy provisions. It may include items such as emotional distress, attorney fees, and punitive damages. A bad faith claim seeks extra contractual damages based on the insurance company’s alleged failure to fulfill its obligations according to the terms of the insurance policy. Examples could be failure of the insurance company to settle within the policy limits or a wrongful disclaimer of coverage.

Extended Reporting Period

In "claims-made" liability policies, only those claims that occur after the retroactive date and are reported or filed against the insured during the policy period, are covered by the policy. The ERP, or tail, is an endorsement available to extend the reporting period for the filing of a claim to give additional time in order to be considered covered.



A person who occupies a position of trust, especially one who manages the affairs of another. For example, the guardian of a minor is a fiduciary.

Fiduciary Liability

A form of liability coverage covering certain breaches of an insured’s obligation to safe guard and correctly administer the funds of others held by the insured. An example might be funds in a pension plan or other employee retirement account.

First Party Claim

Claim made by an insured for property damage or injury sustained by an insured.

Flat Cancellation

The cancellation of a policy as of the time it attached, with all of the premium refunded to the policyholder.


General Liability

A form of insurance sold to businesses to indemnify the business for third party liability claims due to negligence. Coverages can include premises and operations liability for onsite and jobsite accidents and products liability claims for products that injure third parties.

Good Faith

Requires an insurance company to give consideration to the insured’s interests that is at least equal to the consideration it gives its own interests.



A condition which may lead to a loss, such as oily rags leading to a fire.

Hired and Non-Owned Auto

A type of coverage that protects an insured for loss from the negligent operation by an insured or the insured’s employees of vehicles that the insured hires, rents or borrows from another. It does not provide coverage for the negligent operation of vehicles that the insured owns or has on long-term lease.

Hold Harmless

A contractual provision that obligates one party to assume the legal liability for the acts or omissions of another party.

Homeowners Policy

A package policy for dwelling and contents risks combining fire and allied line coverage with comprehensive personal liability and theft insurance for homeowners and tenants. This policy carries an indivisible premium in that the premium is not separately stated or broken down for the various hazards insured against. There are different homeowners forms, varying in extent of coverage and cost from the broad cause of loss policy (HO2), to the special cause of loss policy (HO3), to the renter's policy (HO6).


Inception (Effective date)

The date on which coverage under the policy begins. Most policies begin just after midnight at 12:01 a.m. on the policy inception date.

Incurred Amount (of loss)

The total of loss reserves, expense reserves, paid loss and paid expense applying to a specific claim.

Indemnity, Principle of

States that no insured should profit from a loss. According to this principle, an insured should be compensated for the amount of a loss, but not more.

Independent Adjusters

Adjusters that handle claims for insurance companies on a case-by-case basis for a fee. They are not employees of insurance companies.


A visual or physical examination of a property to determine whether it is an acceptable risk for insurance.


The amount of premium and fees owed at a particular interval in time during the policy period.

Insurable Interest

A potential for financial loss from a certain event which a person must have before acquiring insurance against that event. The event may be illustrated by the following: the destruction of property owned (in fire insurance); the incurring of legal liability for negligence in causing loss to others (in liability insurance); the compliance with law (in workers compensation insurance).


The transfer of risk, or chance of loss from one party (the insured) to another party (the insurer), in which the insurer promises, usually specified in a written contract, to pay the insured or others on the insured's behalf, an amount of money, services, or both, for economic losses sustained from an unexpected (accidental) event, during a period of time for which the insured makes a premium payment to the insurer.

Insurance Policy

The written contract or insurance policy between the insured and the insurer detailing the coverage provided, exclusions and limitations, conditions in case of loss, and other details pertinent to the terms of the agreement.


The person(s) or party(ies) protected by an insurance policy, synonymous with assured. Some property-liability policies distinguish between the named insured and other insureds.


The insurance company or other organization such as a syndicate, pool or association providing insurance coverage and services.

Insuring Agreement

The portion or section of an insurance policy that details what is covered by the contract for causes of loss or perils, subject to other provisions such as exclusions, limitations and conditions.


Specific written questions or requests that the opposing party in a law suit must answer in writing.


An itemized bill for the insurance coverages provided, containing balances, installments and amounts due.


Joint and Several Liability

Legal doctrine permitting recovery from any of several co-defendants based on ability to pay rather than degree of negligence.


Liability Insurance

Protection which pays sums that an insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. Usually provides coverage for bodily injury or damage to property of others.


A form of security interest given to an individual or company which grants a financial interest in property in order to secure the payment of a debt or performance of some other obligation by the owner of the property.

Limit of Liability

The maximum dollar amount an insurance company agrees to pay the insured person in case of loss.


These are exclusions, exceptions, or reductions of coverage in an insurance policy.

Limited Liability Company (LLC)

A Limited Liability Company combines the personal liability protections of a corporation and the pass-through tax benefits of a partnership or sole proprietorship. Owners of LLCs typically are called members and share equally in the management responsibilities of the company. LLCs may also choose to appoint certain owners or outside personnel to manage business operations.


The maximum amount of benefit the insurance company will pay for a given situation or occurrence.

Liquor Liability Laws

State laws that hold a person or entity legally responsible for loss arising out of that party’s providing alcoholic beverages to another, intoxicated party.

Loss Payable Clause

A condition in a policy whereby the company may be directed by the policyholder to pay any loss due the policyholder to some other party designated in the policy. Usually the payment is made by check or draft payable to both the insured and the designated payee.

Loss Reserve

An estimate of the amount an insurer expects to pay for reported and estimated claims. May include amounts for loss adjustment expenses.



A negotiation process in which a neutral outside party helps participants examine issues and develop a mutually agreeable settlement. Used in Alternative Dispute Resolution.

Medical Payments (Med Pay) Coverage

Protection to pay the cost of medical care to an injured party regardless of whether the policyholder is liable. Written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.

Moral Hazard

A condition or characteristic by which an insured intends to profit from an insured loss.

Morale Hazard

The condition which exists when an insured becomes lax in matters of safety and fire prevention because insurance is in force to pay for a loss which may occur.

Mortgage Holder

The company that holds the mortgage note on real property and in insurance is listed on the policy as mortgagee.


Formal requests for a court to take a particular action.

Motor Vehicle Report

A record usually kept by an individual state's bureau of motor vehicles (or similar department). MVRs are frequently used by insurance companies to verify the underwriting and rating information on their current and prospective insureds.


The record shows (minimally) a licensed motor vehicle operator's identifying information (name, address, age, physical attributes, SSN, etc,) date of license issue or renewal, and dates of any traffic violations or license suspensions, revocations or reinstatements. Further, depending on the state, the record may include the dates of vehicular accidents. Accident information (when provided) usually depends upon whether it was the operator's fault and if it exceeded some monetary or verbal threshold. States also vary on the length or time it will keep records of driving incidents and the "points" they assign to such incidents.


Named Insured

The name of the business or person who owns the insurance policy.

National Flood Insurance Program (NFIP)

A program offered by the U.S. government’s Federal Emergency Management Administration that pools policy premiums throughout the United States. It is backed by the federal government and offers reasonable rates to the public for flood damage coverage.


Failure to use the proper care required by law to protect others from harm. There are four elements that need to be proven in order to establish negligence: Legal duty owed, failure to meet that duty; damages suffered, and a causal connection between the breach of duty and resulting damages. Negligence is the most common basis for suits or claims covered by liability insurance policies.

Non Renewal

When an insurer chooses not to provide an additional period of policy coverage due to poor loss experience; a decision to stop offering a type of coverage, or other reason (as long as the reason complies with applicable state law).

Non-waiver Agreement

A signed agreement in which the insured stipulates that the continuance of a loss adjustment process by the insurer shall not be construed as an admission of liability by the insurer. Used when there are substantial questions as to the amount of the claim or whether the policy affords coverage at all.

Nuisance Value

An amount that an insurer will pay to settle a claim not because it is a valid claim or covered by the policy contract, but because the insurer considers it worth that amount to settle and close.


Occurrence Policy

A type of liability policy that covers negligence for accidents that occur during the policy period.

Original Policy Declarations

The way that the policy looked on the day it was first issued. It does not include any subsequent changes made to the policy.


Package Policy

A combination of property-liability coverages of two or more separate policies in one contract with one premium. The development of package policies is a move toward economy and efficiency in giving the policyholder one document instead of several.


Partnerships are frequently composed of groups of professionals, such as attorneys, accountants and lawyers, but may also be retail and service businesses.

Personal Injury Coverage

Generally includes coverage for loss that an insured may become obligated to pay to another for the financial consequences resulting from false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution or humiliation, libel, slander, defamation of character or invasion of rights of property caused by an insured.

Personal Injury Protection (PIP)

Personal Injury Protection is the basic coverage in no-fault automobile insurance states. PIP is a coverage in which the auto insurance company pays, within the specified limits, the medical, hospital and funeral expenses of an insured person, people in the insured vehicle and pedestrians struck by a covered vehicle. Depending on the state, PIP may also cover lost wages and additional expenses.

Personal Property

Property other than real (fixed, structural) property.


Formal written statements of the facts and claims of each side in a lawsuit.

Policy Conditions

Provisions of an insurance policy, which state the rights and duties of the policyholder and the rights and duties of the insurance company.

Policy Period

Interval of time during which the policy is in effect.


The party to whom a policy is issued and who pays a premium to an insurer in consideration of the latter's promise to provide insurance protection.

Post-judgment interest

After a court makes an award, the losing party is required to pay a set amount of interest that accrues until the amount is paid. Insurance policies often specify whether this is an expense that is paid by the policy.

Pre-judgment interest

An additional amount that an insurer may be required to pay as part of a court settlement. The amount basically represents an interest charge on the disputed settlement. The intent is to provide compensation for any settlement gap related to the payment delay caused by the lawsuit and trial process.


The amount of money paid to an insurance company in return for insurance protection.

Pro Rata

The percentage that represents the number of days an insurance policy was in effect in relation to the total number of days in the policy period.

Pro-Rata Cancellation

Termination of a policy by the insurer, for which the return premium due the policyholder is the full proportion for the unexpired term based upon the calculation of the number of days of coverage provided to the premium charge per day. In other words, the pro rata refund is not a "short-rate" return.

Products/ Completed Operations Insurance

Coverage designed to protect against the liability for injury, loss, or damage that a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.

Professional Liability

A type of coverage that protects physicians, accountants, architects, engineers, attorneys, insurance agents and brokers, and other professionals against liability arising out of their professional acts or omissions.

Proof of Loss

A formal statement made by the policyholder to the insurance company about a loss. The purpose is to provide the company with sufficient information about the loss to help it decide its liability under the policy.

Property Damage

Physical injury or destruction of tangible property, including loss of its use.

Property Insurance

Any type of coverage that indemnifies an insured who suffers a financial loss because property has been lost, stolen, damaged, or destroyed.

Proximate Clause

That which brings about a result without the intervention of any other force. Important in insurance since it establishes which policy(ies) will pay for a loss, i.e., the one(s) insuring the peril which was the proximate cause of the loss.

Public Adjuster

An individual or company that represents an insured to negotiate a settlement with the insurance company in exchange for a fee or percentage of the settlement.


Real Property

The earth and all attached to it; land and buildings. Also known as real estate.

Recreational Vehicle

A land vehicle designed for use off public roads and not subject to any motor vehicle registration laws (different from automobiles).


Generally a person related by blood, adoption or marriage to the policyholder who is also a resident of the policyholder’s principal household.

Replacement Cost

When used in property insurance contracts, this is the amount it would take to replace the property with like property of the same quality and construction. No deduction is made for depreciation or obsolescence.

Reservation of Rights

Letter to an insured specifying coverage issues and reserving the right to disclaim coverage and to withdraw defense counsel, if defense is being provided, once investigation of the coverage issue is completed.


A place where the policyholder resides or a one to four family dwelling, individual condominium or cooperative unit owned by the policyholder and rented or leased to others.

Retained Limit

The amount of loss that a policyholder is required to pay before the insurance company is obligated to begin paying.


The amount which an insured or an insurer assumes as its own liability and which is not insured otherwise.

Retroactive Date

The date after which an occurrence or loss must have taken place for there to be coverage for that occurrence or loss under a Claims Made Policy Form.

Return Premium (RP)

A portion of the premium returned to a policyholder as a result of cancellation or endorsement to the policy.

Rules of Civil Procedure

These rules govern the litigation process and the form and substance of all documents that must be filed with the court.


Self-insured Retention

The portion of each loss that an insured retains by setting aside funds or by possibly using alternative type of financing to meet losses. It acts very similar to a deductible although normally, on a much larger scale. It is also considered to be a form of self-insurance.

Short Rate Cancellation

Termination of a policy by the policyholder before its stated expiration, with the insurer refunding to the policyholder a return premium in an amount less than the pro rata part that is still unearned to compensate the insurer for expenses incurred to that point, since the termination is at the request of the policyholder.

Special Form

A property coverage form protecting insureds from all causes of physical damage loss unless otherwise limited or excluded.

Special Investigation Units (SIU)

Special insurance company fraud units created for investigating and reporting fraudulent claims.

Split Limits

A limits concept used in general liability and automobile liability policies whereby separate limits are set for each coverage. The most common example is one limit for bodily injury and another for physical damage, with still another for medical payments.

Stated Amount

When the value of property, either real or personal, is agreed upon at the issuance of the contract and, therefore, coinsurance and any other valuation clauses will not apply at the time of a loss.

Statues of Limitation

A statute limiting the time within which a legal action may be brought.

Statutory Law

Body of law based on statutes and legislative action rather than from the decisions of judges.

Stop Loss

A provision in an insurance policy created to cut off an insurance company’s or insured’s losses at a certain point.


In insurance, the substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for a loss paid by the insurer.

Survival Statute

Permits a decedent’s estate to make a claim for damages that the decedent suffered between the time of the accident and the time of the decedent’s death. Damages could include out-of-pocket expenses and pain and suffering.


Third Party

The claimant under a liability policy, so called because the first two parties are the insured and insurer, who enter into the insurance contract, which pays the third- party's claim.

Trial Court

Used to conduct trials and hear evidence provided through witnesses; the court of original jurisdiction.


Underinsured Motorist Coverage (UIM)

Coverage an insured may purchase to protect his or her own self from damage or injury caused by a negligent party who does not have adequate limits of insurance to cover the loss.

Underlying Insurance Policy

The basic or primary layer of coverage, the initial policy that will respond to the covered loss. Only when the limits of the underlying policy have been exhausted, will the other respective layers of insurance respond, as with the case of an excess or umbrella policy in liability insurance.

Underlying Limits

In the case of liability excess or umbrella policies, it refers to the limits of the primary (underlying) policy below the excess or umbrella policy which will respond first to loss. Many excess or umbrella policies have established minimum limits for underlying policies. Should the underlying policy not meet the minimum limit requirements, the excess or umbrella will not be offered.



Underwriting Department

The department or group of employees responsible for the process of selecting, classifying, evaluating, rating, and assuming risks.

Unearned Premium

The portion of the premium representing the unexpired portion of the policy term.

Uninsurable Risk

Those cases where a risk cannot be insured because the possibility of or frequency of loss is so high, or the cause of loss considered illegal, criminal, or against public policy.

Uninsured Motorist (UM) Coverage

Under an auto policy, protection for the insured against bodily injury or property damage (in some states) caused by the negligence of an uninsured or underinsured motorist.


Voided Policy

When important information related to seeking insurance coverage has been concealed, misrepresented or is fraudulent, the insurer may have the right to dissolve a policy's coverage as though the policy never existed.



The voluntary relinquishment of a known right by a person that results in estoppel.

Waiver of Subrogation

A condition of an insurance policy which states that the coverage will not be prejudiced if the insured has waived in writing prior to a loss any rights of recovery from a party responsible for the loss.

Workers’ Compensation Insurance

Protection which provides benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits provided.

Wrongful Act

Any actual or alleged act, error, omission, misstatement, misleading statement, neglect, or breach of duties. This may be a specifically defined term in some Professional Liability policies.

Wrongful Death Statute

Allows decedent’s family to receive compensation for monetary losses suffered as a result of their family member’s death. Provides compensation for those who depended upon decedent for some type of economic benefit. Damages include loss of support from reasonably expected earnings capacity of the decedent, loss of decedent’s contributions to the estate, loss of inheritance, etc.