Actual cash value (ACV): The cost to replace an item of property at the time of loss, less an allowance for depreciation; often used to determine the amount of reimbursement for a loss.
Additional coverages: Supplemental insurance coverages that apply only in certain circumstances, have reduced or separate limits of liability, or require the insured to meet certain requirements before they are applicable; also called coverage extensions, other coverages, and extended coverages.
Additional insured: An individual or company, in addition to the insured, who is listed in the declarations; an example is a mortgage company that has an insurable interest in the property insured.
Aggregate limit: Type of policy limit found in liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
A.M. Best Company: Organization that rates the financial stability of insurance companies doing business in the United States.
Audit: Survey of the insured’s financial records to gather information used to calculate the premium, such as exposures and limits.
Binder: Oral or written statement that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied.
Building and personal property coverage form: Commercial property coverage form that covers buildings, the insured’s business personal property, and the personal property of others located at the business premises.
Business income coverage forms: Commercial property coverage forms that pay for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage.
Cancellation: Termination of an insurance policy by the insured or the insurance company during the policy period.
Certificate of insurance: Written form that verifies a policy has been written; provides a summary of the coverage provided under the policy.
Claims-made form: Commercial general liability coverage form that pays for BI or PD losses for which a claim was first made against the insured during the policy period.
Coinsurance: Policy condition that requires an insured to pay part of a loss if the amount of insurance carried on property is less than a specified percentage of the value of the property at the time of loss.
Commercial general liability (CGL) coverage Part: A part of the commercial package policy that provides liability coverage for businesses.
Commercial package policy (CPP): The insurance services office (ISO) commercial lines policy that contains two or more lines of insurance or two or more coverage parts; it will include some forms and/or endorsements that are common to all lines of insurance or coverage parts, as well as the individual forms and endorsements required for the individual coverages selected; the CPP can include almost any commercial coverage the insured might need, with the exception of ocean marine, aviation, and workers’ compensation insurance; most commercial risks are eligible for the CPP.
Damage to Premises: Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured’s care, custody, or control.
Declarations: Section of an insurance contract that shows who is insured, what property or risk is covered, when and where the coverage is effective, and how much coverage applies.
Deductible: Dollar amount the insured must pay on each loss to which the deductible applies; the insurance company pays the remainder of each covered loss, up to the policy limits.
Deposit premium: Premium paid at the beginning of the policy period that is based on an estimate of what the final premium will be; this premium is adjusted based on reports submitted by the insured to the insurer; also called an estimated premium.
Earned premium: Premium an insurance company has actually earned by providing insurance protection for the designated period of time.
Endorsement: Document attached to an insurance policy that changes the policy in some way.
Exclusions: Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy.
Extended reporting period (ERP): Period of time provided by the claims-made commercial general liability coverage form during which coverage will be provided for claims made after the expiration date of the policy if certain conditions are met; the basic ERP runs 60 days and can be extended to five years; the supplemental ERP runs for an unlimited duration, but is available only by endorsement for an additional premium.
First-named insured: First person listed in the declarations as an insured; the first-named insured may have a higher level of duties or rights under the policy.
Flat cancellation: Cancellation of a policy by the insured or the insurance company on its effective date.
Hired and non-owned auto liability endorsement: Businessowners policy endorsement used to cover hired or non-owned autos used by the business.
Named insured: Person, business, or other entity named in the declarations to whom the policy is issued.
Nonrenewal: Decision made by an insured or insurance company to not continue coverage for another policy period after the current policy period expires.
Occurrence form: Commercial general liability coverage form that covers bodily injury or property damage that occurs during the policy period, regardless of when the claim is made.
Policy limit: Maximum amount the insurance company will pay for a particular loss or for losses sustained during a period of time; also called limit of coverage, limit of insurance, and limit of liability.
Policy period: The date and time specified in the declarations for when coverage begins and ends.
Products and completed operations: Business liability exposure arising out of defects in the company’s products or completed operations; covered by the CGL.
Property insurance: Line of insurance that includes many types of coverages designed to handle the risk that a person will suffer financial loss because something she owns is damaged or destroyed.
Replacement cost: The cost to replace a damaged or destroyed item of property without deduction for depreciation; may be the basis of reimbursement for some losses.
Retroactive date: Under the claims-made COL form a date stipulated in the declarations as the first day on which an event may occur and be covered by the policy if a claim is filed.
Terrorism Risk Insurance Act of 2002: Federal law designed to ensure that insurance coverage for terrorism losses under commercial lines policies will be available and affordable; it requires insurers to pay a specified amount for terrorism losses in a given calendar year; once that limit is reached, the federal government will reimburse insurers 85% of insured losses that exceed the limit.
Warranty: A specific agreement between the insured and the insurer that becomes a part of the insurance policy; a breach of warranty can void the policy.