insurance - glossary of terms

A

Accumulated Depreciation The total decrease in an item’s value over a period of time. Formula: (Annual Depreciation x Number of years used)

Acreage Reporting Date The deadline for providing the insurer with an acreage report, which is used to determine the amount of coverage needed and the premium charged for a particular crop.

Actual Cash Value (ACV) A valuation method used by insurers to reflect an item’s current market value right before being damaged or destroyed. Formula: (Replacement cost – Accumulated Depreciation)

Actual Production History A history of a farmer’s crop yields over a multi-year period, which is used to determine the normal production level of a farm.

Adhesion Characteristic of an insurance contract. Means that one party (the insurer) sets the terms, and the other (the policyholder) can “take it or leave it.”

Adjusted Gross Revenue (Crop Insurance) Narrowest (and least expensive) form of Crop Revenue Insurance. Insures farm revenue as a whole instead of individual crops. Guarantees a percentage of the insured farm’s average revenue.

Adjuster An agent who, for compensation, processes insurance claims. Can represent either the insured or the insurer.

Adjuster – Emergency Adjusters who are temporarily licensed by the insurance commissioner to handle claims during catastrophes or emergencies that produce an overwhelming number of claims in a short period of time.

Adjuster – Independent Self-employed adjusters who contract with multiple insurers at the same time. Paid on a commission or fee-plus-expenses basis for each claim. Also called: Fee Adjuster, Bureau Adjuster

Adjuster – Public An adjuster who is hired to represent the claimant and help determine a fair indemnification. Usually specializes in appraisals and negotiation. Paid commission, usually a percentage of final settlement.

Adjuster – Staff Salaried employee of one insurance company who can work locally, regionally, or nationally. Also called: Company Adjuster

Advance Payment Settlement A settlement option that lets the insurer offer some financial relief to the claimant before the claim has been fully settled. The insurer makes advance payments to the claimant, which are then subtracted from the final settlement amount. Often used when a claimant suffers bodily injury and is unable to work.

Agency Authority The Agent’s authority to act on behalf of someone else, usually an insurer. This authority is derived from the agent’s contract with the insurer.

Agency Authority – express Authority that is expressly given to the agent in writing. Allows agent to act on behalf of the principal.

Agency Authority – implied Authority that an agent possesses by implication of her behavior, regardless of whether this authority is granted in writing.

Agency Authority – apparent Authority that an agent possesses based on the appearance of representing the insurer.

Agent Someone who has received authority from an insurer to sell or service insurance policies.

Aggregate Limit A type of policy limit found in some health, liability, and property damage policies. It represents the total amount the insurer will pay for all losses (as opposed to an occurrence limit, which denotes the total amount the insurer will pay per occurrence).

Agreement One of the four requirements of a legally binding contract. All parties involved must agree to the terms of the contract. Can also refer to a binder, which is the preliminary substance of a contract.

Agricultural Producer A business that grows, harvests, and sells crops for profit.

Aleatory A characteristic of an insurance contract. Means “depending on an unknown future event.” An insurance contract will only pay IF and WHEN covered damages occur. Neither party knows how much the contract will end up paying when they enter into the contract.

Answer In liability cases, the defendant’s response to a complaint. There are three possible answers: 1) accept complaint and pay for damages, 2) deny the complaint, or 3) accept the complaint with a right to insert evidence into the case.

Annual Depreciation An item’s Replacement cost divided by the number of years in its expected lifespan.

Appraisal A negotiation method which allows the claimant and the insurer each to select an appraiser. The two appraisers in turn select an Umpire. The appraisers then work together to determine a settlement amount. If they cannot agree, the Umpire steps in. Agreement by any two of the three is binding.

Arbitration A negotiation method in which the opposing parties each submit their evidence to a mutually-agreed-upon and neutral third party, called an arbitrator. The arbitrator reviews the positions of each opposing side, and makes a final and legally binding decision.

Arbitrator The mutually-agreed-upon and neutral third party in an arbitration who reviews the positions of each opposing side, and makes a final and legally binding decision.

Artificially Generated Current Also called “artificial current.” A peril covered in some property insurance policies. It includes sudden and accidental damage from any electrical current, except currents that are naturally generated, such as lightning or static electricity.

Auto Policy Insurance policy designed to protect the policyholder while owning, occupying, or operating a vehicle. Usually combines liability coverage and property coverage into one policy.

Automobile In Insurance policies, Automobile generally means any vehicle designed for use on public roads.

Automobile No-Fault Laws Laws in effect in some states that require any owner of a vehicle to purchase no-fault insurance; that is, insurance that indemnifies the insured regardless of who was at fault in an accident. No-fault laws also restrict the insured’s right to sue the at-fault party.

Aviation Aviation insurance combines hull insurance for the aircraft and liability insurance for any damage to others’ property or to people who are not passengers.

 


B

Baliee An individual or company that receives the property of someone else for a special purpose, and returns the product after use.

BAP The Business Auto Policy provides property damage and liability insurance for automobiles used by a business.

Binder A temporary contract provided by an insurer that ensures coverage until the complete, permanent policy is issued.

BI (Bodily Injury) Physical damage to someone’s person. Liability insurance covers bodily injury that the insured might cause to another person through negligence.

Boiler & Machinery Boiler and machinery insurance is designed to indemnify a business for damages to, and damages by, boilers, machinery, motors, generators and a variety of other electrical devices and appliances.

Bond A contract wherein one party guarantees the performance of a third party. Bonds involve three parties: (1) the surety agrees to pay the second party, (2) the obligee, if the third party, (3) the principal, neglects to carry out an obligation it has to the obligee.

Breach of Product Warranty The failure or falsehood of a stated promise of a product stipulation.

Business Personal Property Moveable property used for business

 


C

Catastrophe An occurrence or a sequence of occurrences that causes enormous property losses. Catastrophes are normally uninsurable by private insurers.

Cause of Loss A form included in a Commercial Package Policy or a Commercial Property Policy that lists the causes of loss from which the insured property is covered.

CGL A Commercial General Liability policy protects businesses against damages and injuries to third parties.

Civil Civil law observes court cases of one citizen charging another citizen for damages caused by tort; it differs from criminal law.

Claim The request for settlement that the policyholder files with an insurer after she experiences a loss.

Claims-Made Form A liability policy in which the insurer pays only those claims arising during the policy period (as opposed to those claims arising after the policy period is over, regardless of whether the incident took place during the policy period).

Claims Management The practice of the insurance adjuster of managing a claim by processing it in a prompt and effective manner from the time the claim is filed until a settlement is reached, while adhering to all local and federal laws.

Claimant One who files a claim with an insurer for a loss.

Coarse Grains In Crop Insurance, a provision that covers reduction in crop quality, as well as crop-yield losses. Coarse grains are corn, grain sorghum, and soybeans.

Coinsurance The Coinsurance Clause applies to policyholders who purchase an inadequate amount of property insurance. These policyholders must pay a percentage of the claim. In health insurance, coinsurance refers to the portion of a covered claim that the insured is responsible for paying out-of-pocket, after the deductible has been paid.

Code of Ethics A set of governing professional standards of conduct, usually created by regulatory bodies or government regulatory agencies. These standards may also be formally codified with statutes.

Coercion The practice of forcing another party to behave in an involuntary manner (whether through action or inaction) by use of threats or intimidation or some other form of pressure or force.

Commerce The exchange or transport of goods or property.

Commercial Having to do with commerce or business activity in general.

Commercial Crime Insurance Commercial insurance that covers employee dishonesty and theft by employees or others.

Commercial Lines A variety of insurance coverages that protect those involved in the business of creating, selling, displaying, evaluating, or shipping, etc. Example include: Business Owner’s Policy; Commercial Property; Commercial General Liability; Workers Compensation; Professional Liability (D&O), Errors and Omissions (E&O) and Employment-Related Practices Liability.

Commercial Property Floater A means of protecting a business’ property that is not in one fixed location.

Common Crop Insurance Policy A single uniform policy that combines Crop Revenue Coverage, Revenue Assurance, Income Protection, and Indexed Income Protection.

Common Law Based on court decisions and customs when statutory law does not provide an answer; creates precedent.

Compensatory Damages Money awarded in civil court for tangible and intangible damages caused by a policyholder.

Compensatory damages – Special Money awarded for the exact value of the physical damage caused to the plaintiff up to the trial date. This is an objective value determined by receipts and medical bills.

Compensatory damages – General Money awarded for the emotional losses of the plaintiff that will continue after the trial date. These are a subjective value and are determined by the court.

Competence One of the four qualifications of a legally binding contract. All parties must be competent, with the necessary legal and mental capacity.

Complaint A complaint initiates a civil lawsuit by a claimant requesting financial relief from damages caused by a policyholder.

Concealment The act of withholding relevant material facts from an insurer.

Conditions The section of a policy that qualifies or limits an insurer’s promise to pay or perform.

Consideration One of the four qualifications of a legally binding contract. All parties must bring something of value to the contract.

 


D

Damages – general Intangible losses such as pain and suffering, or mental anguish.

Damages – special Tangible, financial losses that can be documented.

Dangerous Instrumentality Doctrine States that anyone involved in the use of inherently dangerous products or machines is held 100% liable for their own damages.

Dec Page Also called the Declarations Page. First page of a policy, which provides a summary of the contract; includes names of insured, addresses, coverage limits, policy period, etc.

Declined Coverage takes place when an insurance company rejects an application for coverage.

Deductible Deductible: the amount the policyholder must pay out-of-pocket before the insurance company will pay the remaining costs.

Deductible – fixed A fixed deductible is one specific, predetermined amount that a policyholder must pay out-of-pocket before he can be indemnified.

Deductible – percentage A deductible that is calculated as a percentage of the value of the insured risk.

Deductible – franchise A franchise deductible states that the policyholder only pays for damages that are less than his deductible. If the cost of damages equals or exceeds his deductible, the insurer pays the full amount and the policyholder pays nothing.

DefamationDamage to another’s name or reputation, whether by libel, which is in print, or by slander, which is in speech.

Default Judgement Default Judgement is entered by the court against the party who failed to defend against a claim brought on by another party. In other words, if the person fails to show up and answer the claim the court will find in favor of the other party.

Definitions Page in policy that gives specific limited meaning to terms used in policy.

Depreciation A decline in value of property caused by wear or loss of usefulness usually measured by a specific formula.

Direct Loss Physical harm to tangible property caused by a peril.

Discoverable Capable of being demanded and handed over as evidence in a court of law; during litigation proceedings, the adjuster’s claims file is discoverable.

 


E

Eligiblity Eligibility Requirements are found in some insurance policies. They identify the conditions that must be met by the policyholder in order to qualify for coverage under a policy.

End of Insurance Date The date that crop insurance coverage will end. It is the earliest of: total crop destruction, harvest of the crop, final adjustment of a loss, abandonment of a crop, or a date predesignated by crop type.

Endorsement(s) An optional provision that can be added to a policy to increase, reduce, or modify coverage for specific property types or perils.

Errors and Omissions Liability insurance that indemnifies professionals for errors or oversights on the part of the insured that caused harm to their clients.

Estoppel A legal principle that bars a party from asserting something contrary to what has been implied by his previous actions or statements.

Ethical Adhering to moral laws and to principles of fairness.

Evaluation Evaluation, determining the approximate value of damages relevant to a claim i.e. total of medical bills, costs of repair & replacement of damaged property and the consideration of the financial provisions of the insurance policy.

Exclusions A section of an insurance policy that reduces coverage by listing specific individuals, property, or perils that are NOT covered by the policy.

Exposure The extent to which an item is open to damage or loss. More exposure means a loss is more likely.

 


F

Fair Credit Reporting Federal legislation that gives an applicant for insurance the right to investigate the reasons his insurance application was denied.

False Advertising Presenting something in a deceptive or untrue manner to the consumer; misrepresentations in advertisements.

Farm A property where a farmer or rancher both resides and conducts commercial business.

Farm Liability Coverage Form A form added to a farm insurance policy that provides coverage for injury and damage to a third party.

Farm property coverage form A form added to a farm insurance policy that provides coverage for the dwelling, other structures, farm structures, and both household and farm personal property.

Farmer Someone in the business of growing, harvesting, and selling crops for profit. In Farm insurance, a farmer must reside and do business on the same premises.

Federal Crop Insurance Act Legislation passed by Congress that established the Federal crop insurance program.

Federal Crop Insurance Corporation (FCIC) A government-owned corporation that manages the Federal crop insurance program.

FEMA Federal Emergency Management Agency – a branch of homeland security that coordinates relief programs when disaster strikes an entire community.

Fiduciary One of the terms that describes the adjuster’s relationship with the principal (the insurer). As Fiduciary Agent, the adjuster acts for the benefit of the principal, rather than for his own benefit.

Final planting date The last day to plant crops in order to receive the full insurance yield and/or revenue guarantee selected.

First Named Insured The first person or entity named as insured on the declarations page of a policy.

Floater A term for Inland Marine policies that cover mobile property.

Flood An overflow of inland or tidal waters; an unusual or rapid accumulation of runoff or surface waters from any source; mud flows; collapse or subsidence of land along the shore of a lake or other body of water.

Flood Insurance provides relief following flood damage to communities who participate in the NFIP floodplain management system; covers damages to the building and its contents

Floodplain Management maps out areas with high risk of flood, so that communities will avoid building in these areas

Fraternal Benefit Societies Fraternal Benefit Societies, or Fraternal Associations, are non-profit, mutual aid organizations that engage primarily in charitable or benevolent activities. They offer their members insurance against death, disease, and disability.

Fraud The act of deceiving an insurance company in order to collect more money than one is legally entitled to.

Fraud, Hard Deliberately faking or causing an incident in order to collect money.

Fraud, Soft Inflating the gravity or the extent of claims in order to receive a higher indemnification.

Full and legal purpose See also “Legal Purpose.” One of the four qualifications of a legally binding contract. The purpose of the contract must be legal (e.g. no contracts for illicit drug deals).

 


G

Good faith Acting honestly and fairly, with good intentions and full disclosure.

Group Risk Income Protection (Crop Insurance) A form of Crop Revenue Insurance that protects a whole county or area instead of individual farmers. Automatically indemnifies if county income falls below a certain level.

 


H

Hazard, Moral Hazard caused by insured persons deliberately engaging in risky behavior because they know that insurance will indemnify them for the losses.

Hazard Anything that increases the chance of loss.

Hazard morale Unconscious tendency of insured people to engage in riskier behavior.

Hazard Physical Any physical condition that increases the chance of a loss.

HIPAA Health Insurance Portability and Accountability Act, 1996 US law protecting consumer privacy, regulating collection, use and storage of private information.

HO Forms 2 The “broad” or “cheap” form of Homeowners Insurance; a basic, named-peril HO form that nevertheless is less limited than the HO-8.

HO Forms 3 “Special form” of Homeowners Insurance; all-peril coverage for structures, named-peril coverage for contents.

HO Forms 4 “Contents broad form”; named-peril renter’s policy covering only personal property and any structural improvements made at tenant’s own expense.

HO Forms 5 “Comprehensive form” of Homeowners Insurance; provides all-peril coverage to both structures and contents; the Cadillac of HO forms.

HO Forms 6 “Condo” or “unit owner’s form”; named-peril homeowners policy covering personal property and the surface structure of a condominium.

HO Forms 8 “Modified coverage form” of Homeowners Insurance; named-peril coverage for structures and contents, fewer perils covered; form for buildings with low value.

Homeowner’s Policy An insurance policy that combines property coverage with liability coverage for a person’s home.

 


I

IIPPA The Insurance Information and Privacy Protection Act regulates how an insurance company can use consumers’ private information.

Impaired Property Property that is defective because the insured’s deficient or incomplete additions or work.

Income Protection (Crop Insurance) A form of Crop Revenue Insurance. One of the cheapest available; provides a fixed revenue guarantee based on early commodity prices for the crop type.

Indemnification Reimbursement for a loss, which leaves the claimant in the same financial position that she was in before the loss.

Indemnify To restore by payment, repair, or replacement

Indemnity Insurance Insurance that indemnifies loss as opposed to liability

Indirect Loss An economic loss that results from the direct, or physical, loss.

Inland Marine Insurance that protects property being transported over land

insurable acreage All of the acreage of the insured crop, for which a premium rate is provided in the actuarial documents, in which the insured has a financial interest, and which is planted in the county listed on the application.

Insurance A financial device that transfers the risk of unexpected, catastrophic losses from one party to another.

Insurance Company Company which sells insurance policies to individuals or to other companies.

Insurance Policy A contract wherein an insured pays premiums to an insurer in exchange for financial protection in the event of a covered loss.

Insurance Rating Systems Methods of evaluating the risk involved in insuring a person, property, or a corporation. Insurers use rating systems to calculate premiums.

Insured A person or entity who is covered under an insurance policy.

Insured crop The crop in the county for which coverage is available as specified by the policy.

Insurer The person or entity providing coverage to one or more insureds.

Insuring Agreement A section of an insurance policy that summarizes the insurer’s promise to pay. Includes list of covered property and perils.

Interest Direct financial interest in protecting a unit.

Intervening Cause A separate occurrence that “intervenes” between a defendant’s actions and damage or loss to another person. An intervening cause may decrease the defendant’s liability, if the defendant can show that it was the intervening cause (rather than the defendant himself) that caused the damage or loss.

 


J

Joint Liability shared by two or more persons.

Judgement An official court ruling forming a final decision resolving a dispute or forming a final decree.

 


K

Kickbacks Any sort of reward or remuneration for referrals or favors; for example, a body shop giving money to an adjuster for referring customers.

 


L

Landlord One who has leased property to a tenant.

Late planting period 25 days after the final planting date, during which the yield and/or revenue guarantee drops by one percent per day.

Leased worker Worker hired through a labor leasing firm.

Legal Purpose One of the four qualifications of a legally binding contract. The purpose of the contract must be legal (e.g. no contracts for illicit drug deals)

Liability An obligation to do or not to do something; responsibility for an action.

Liability Insurance Liability insurance indemnifies a third party for damages caused by the insured’s negligence.

Liability – employer Protects employers from claims not covered by workers’ compensation for damages and bodily injury caused to employees while performing under the scope of their employment.

Liability – product Protects a policyholder from legal liability for damages to third parties caused by the manufacturing, merchandising, distributing, or operation of a product.

Liability – public Protects individuals and commercial venues from any property damage or personal injury they may cause to the general public

Liberalization The liberalization clause in an insurance contract is a condition that states that the insurer can add or broaden coverage at any time without writing up a new contract. This clause guarantees that, in the case of legislative action that broadens insurance coverage without any increase in premiums, this additional coverage must take effect in existing policies as well as in new policies.

License A document that shows that a person has been granted authority by the state to act as an insurance agent, broker, or adjuster.

LimitsThe limits of an insurance policy represent the highest amount an insurer will pay. Any cost above the limits of insurance is the responsibility of the policyholder.

Litigation An action brought in court. Litigation takes place when an insurer and a policyholder disagree about a settlement amount and cannot resolve their differences through any sort of negotiation.

Livestock Floater Optional Farm Insurance coverage. Provides stand-alone protection for six kinds of domesticated animals on a scheduled or unscheduled basis. Includes coverage for animals while in transit.

Loss Bodily injury, property damage, or damage caused by the insured’s negligent acts; loss is the basis for an insurance claim. Loss can also mean the sum the insurer will have to pay.

Loss – direct Physical loss or damage to property directly due to an incident; i.e. fire, wind, etc..

 


M

Machinery Machines or the parts of a machine.

Malpractice Negligent or improper actions on the part of doctors, lawyers, and accountants etc., resulting in damage, injuries, or losses to the person receiving their services.

Marine Marine insurance covers items that are being transported, as well as the vehicles used for transportation.

Market Value The price something will sell for in the open market, or “fair market value.”

McCarren-Ferguson Act 1945 US Law exempting insurance from most federal regulation, and placing it under the authority of the individual states.

Mechanical Breakdown Mechanical Breakdown Insurance (MBI) covers losses due to breakdown of motor vehicles.

Mediation A method of negotiation that utilizes a neutral third party adviser to reach a mutually-agreeable solution. Mediation differs from Appraisal in that the decision is not binding to the opposing parties.

Misrepresentation Any false or misleading statement.

Mobile Agricultural Machinery and Equipment Coverage Form A commercial property form that provides coverage for farm machinery and equipment when it is the only exposure, or when coverage must be written separately.

Multi Peril Crop Insurance A form of Crop Yield insurance that offers broad coverage for a multitude of perils. Because it is subsidized by the government, MPCI is subject to federal regulation.

Mutual A mutual insurance company is owned by its policyholders. They have no shareholders and are not traded publicly.

 


N

National Association of State Departments of Agricultural Research Foundation A non-profit association of public officials representing the Commissioners, Secretaries, and Directors of Agriculture in the fifty states and four territories.

National Center for Agricultural Law Research and Information Independent agricultural and food law research and information center created to address the complex legal issues affecting American agriculture.

National Crop Insurance Services A non-profit international organization specializing in statistical data analysis and reporting related to crop insurance risk management.

National Resources Conservation Service A federal agency within the USDA that works with private landowners and operators to help them protect their natural resources.

Negligence The failure to exercise a reasonable degree of care in a particular situation.

Negotiations Negotiations take place when the insurer and the claimant do not agree about an indemnification amount. The insurance adjuster is often the one who will carry out the negotiations.

NFIP National Flood Insurance Program – a program that provides insurance for communities that suffer flood damage and are willing to participate in the FEMA’s floodplain management system.

Non Commercial Non-Commercial insurers are not-for-profit insurance companies that return profits to policyholders by reducing premiums or expanding benefits.

 


O

Occurrence An unexpected event or circumstance that causes injury or damage.

Occurrence Form Policy One of two forms of CGL: triggered by occurrence, so that if a loss occurred during the policy period, it is covered even if the claim is made much later.

Ocean Marine Insurance designed to protect property being transported overseas.

 


P

PAP The Personal Auto Policy is a package policy that combines property damage and liability insurance for motor vehicles.

PD Property Damage: damage or loss of use of personal property.

Peril The actual cause of loss or damage, such as lightning, fire, or theft.

Personal Personal Lines insurance protects the personal and real property of an individual. A Personal Auto Policy and a Homeowners Policy are examples of Personal Lines of insurance, as opposed to Commercial Lines.

Personal Injury... Damages to a third party’s character, reputation, or standing in the community.

Personal Property Floater Protects property owners from damage or losses to personal articles while in the process of transport.

PIP Personal Injury Protection: a form of no-fault auto insurance utilized in some states.

Policy See Insurance Policy.

Policy Period The beginning and end dates of coverage. Found on declarations page.

Policyholder Also called the “insured”, a policyholder is a person who has purchased an insurance policy – or contract – from an insurer.

Power to bind One manifestation of the authority given to insurance agents by the principal. The principal is bound by, or must adhere to, the guarantees and statements made by its agent.

Premium A scheduled and affordable fee, paid by the policyholder to the insurer, in return for coverage.

Preponderance of Evidence A preponderance of evidence is enough evidence to make it more likely that an argument is true than that it is false. In a civil trial, the plaintiff needs to provide a preponderance of evidence in order to win her case.

Principal The principal refers to an agent’s employer (usually an insurance company, but it could also mean anyone who contracts the agent to work on their behalf and gives her the authority to do so).

Principle of Indemnity The principle behind all insurance contracts. It states that, when a loss occurs, the insured should be restored to his or her financial condition before the loss occurred, no better, no worse. The insured cannot profit from a loss.

Privacy In insurance, the right of consumers to have their personal information protected.

Private Private insurance is the term for any insurance other than social insurance. Social insurance programs are run by the government instead of by private individuals.

Private Crop Insurance Crop insurance that does not fall under the Federal Crop Insurance Program and is provided directly to farmers by private insurers.

Professional Liability Professional Liability Coverage is insurance that protects practitioners such as doctors, lawyers, engineers, architects, etc.. It includes two types of coverage: malpractice insurance and errors and omissions insurance.

Proof of loss The form or statement that the policyholder is required to submit to the insurer before she can be indemnified for a loss.

Proximate Cause The original occurrence, the source, of all the subsequent damages.

Punitive DamagesIntangible damages awarded to the plaintiff when the defendant’s actions show intentional heinous, antisocial behavior or extreme indifference to harm. They are determined by the court.

 


R

Rating Systems Measure hazards of individual risk in a given area, and sets premiums accordingly.

RC RC: Replacement Cost, It refers to the cost of repairing or replacing an insured item, based on the item’s value at the time of the loss.

Rebates Refunding of part of the premium, due to the creation of a new contract or change to an existing contract.

Reciprocal Insurers A Reciprocal Insurer is an unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its members.

Reinsurers Companies which sell insurance to insurers to reduce the insurer’s exposure to loss.

Reporting One of the adjuster’s duties is to Report to the Principal. The adjuster must give the principal frequent updates of her progress on any given claim.

Replacement Cost (RC) A method of valuation based on the cost of replacing an item at current market prices, regardless of depreciation.

Reservation of Rights A notification that an insurer might give to an insured, informing him that a reported loss might not be covered under his insurance policy.

Retroactive date Date preceding a policy period before which the policy will not cover occurrences.

Revenue Assurance (Crop Insurance) A form of Crop Revenue Insurance that provides a fixed revenue guarantee based on average county prices

Revenue Protection (Crop Insurance) Also called Yield Protection, this is the most comprehensive form of Crop Revenue Insurance, offering higher coverage amounts than other types. The revenue guarantee is based on the higher of: harvest-market price or early market price. Previously called Crop Revenue Coverage (CRC)

Risk In the insurance industry, risk can have two meanings: 1) the potential for financial loss; being exposed or open to damage, 2) an insured item.

Risk Avoidance Insurers’ practice of denying insurance applications that they believe would involve an inordinate amount of risk.

Risk Management Measures taken by an insurance company to ensure that their exposure is not too high and to control the effect of a loss; for example, an insurer might charge higher premiums to drivers who have received speeding tickets.

Risk Management Agency A federal agency under the USDA that administers the Federal Crop Insurance Program.

Risk Purchasing Groups Groups of people with similar insurance needs who form an organization to buy insurance as a group.

Risk, Pure Risk that does not entail the possibility of gain; the only possible outcomes are a loss or no loss.

Risk Reduction An insurer practices risk reduction when it takes precautions in order to reduce its exposure; for example, requiring that all homes insured by a homeowners policy have fire alarms installed.

Risk Retention An insurer practices risk retention when it chooses to insure a risk instead of denying coverage.

Risk Retention Groups Groups where the members insure each other, using their own capital to write insurance policies.

Risk, Speculative Risk that might result in gain, loss, or no change in circumstance (as opposed to pure risk, which does not include the possibility of gain).

 


S

Sales closing date The last date on which an insurance application for a particular crop can be completed and signed.

Salvage Salvage is damaged property that has cash value. In HO the policyholder has the option of keeping the salvage and accepting a smaller settlement from the insurer. The insurer has the option of keeping the salvage if they have fully indemnified the insured, but in no case can the insured insist the insurer keep the salvage.

Scheduled payment release Sometimes called “open-ended release” or “rehabilitation settlement.” The insurer agrees to pay all of the special damages and general damages that have accumulated so far, and agrees to pay special damages in the future.

Settlement A resolution of a dispute, or an agreement. Settlement allows an insurer and a claimant to resolve a case before it reaches a court of law.

Small Grains In Crop Insurance, a provision that covers reduction in crop quality, as well as crop-yield losses. Small grains are wheat, barley, and oats. See also “Coarse Grains”

Statute of Limitations A statute based on the common law legal system that specifies the maximum period of time, after damages occur, that legal proceedings based on those damages may be initiated.

Statutory Law based on laws set forth by a governing authority; i.e. state legislature

Stipulation A stipulation is something specifically agreed to in a contract, such as an insurance contract.

Stock A Stock Insurance Company is owned by stockholders, as opposed to its own policyholders (as is the case with Mutual Insurance Companies).

Strict Liability Holds a party 100% liable for damages when the activity or instrument they are performing is inherently dangerous.

Subrogation The transfer of rights that occurs when an insurer indemnifies a claimant for a loss. The claimant transfers to the insurer his right to collect the amount of the indemnity from the guilty party.

Sudden and accidental tearing apart A peril covered in some property insurance policies. It refers to damage caused by rupture, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire sprinkler system, or an appliance for heating water. Unlike Accidental Discharge, this peril includes coverage for the system or appliance itself.

 


T

Tort Any civil wrongdoing, whether intentional or unintentional, resulting in a court action to remedy.

Tort – negligent When a negligent act causes unintentional damages to another party.

Tort – intentional A premeditated wrongful act that causes intentional or intentional damages to another party.

Tort law The body of law that addresses and provides remedies for any civil wrongdoing performed on another party.

Tortfeasor The defendant in a court case who committed the tort.

Transitional yield County 10-year yield average as determined by the National Agricultural Statistical Service. Used when issuing a crop insurance policy to a farmer who lacks four years of yield records on which to base coverage and premium amounts.

Trigger An event that “triggers” the coverage provided under a CGL policy: in claims-made, it is a claim, in occurrence form, it is the “occurrence.”

Trustworthiness The virtue of carrying out responsibilities reliably, worthy of being trusted. A necessary attribute of insurance adjusters.

 


U

Umbrella Liability Policy An umbrella policy provides liability coverage over and above the normal or base limits of liability in a policy. An umbrella policy is a type of Excess Liability.

Underinsured Not sufficiently insured against particular losses. For example, any home insured at less than 80% of its value is considered underinsured.

Unfair Claim Settlement Practices Dishonest or unfair behavior related to settling insurance claims which is specifically proscribed by state law.

Unilateral A characteristic of insurance contracts. It means that only one of the parties (the insurer) makes a promise to perform. The insurer is obligated to fulfill this promise, whereas the insured is free to void the contract at any time.

Uninsurable Risks are said to be uninsurable when they do not meet certain qualifications. For example, an insurable risk cannot involve a loss that the insured deliberately causes. Again, certain perils are too catastrophic to be insurable (like war or nuclear events).

Unscheduled Unscheduled property is property covered under an insurance contract that is not listed item by item (as “Scheduled” property would be listed).

U.S. Environmental Protection Agency Federal agency primarily responsible for the implementation of most federal laws designed to protect, enhance, and conserve the nation’s natural resources.

Utmost Good Faith A characteristic of insurance contracts: ‘utmost’ meaning the ‘highest degree’ and ‘good faith’ meaning, “act with honesty, fair dealing and full disclosure.” All parties to an insurance contract must act with utmost good faith. It also applies to a fiduciary agent’s responsibility towards the principal.

 


V

Valuation The processes of estimating what an item is worth.

Value The estimated or appraised worth of an item, used to determine the replacement cost or indemnification amount.

Valued policy A policy in which the insurer and the insured agree to a specific value prior to the start of the policy. If the item is lost or destroyed, the insurer pays the amount agreed upon.

Vicarious Liability When an act of negligence is transferred from one party to another, such as from employee to employer or from child to parent.

 


W

Waiver A waiver is a voluntary act of relinquishing a known right, claim or privilege. Either an insured or an insurer may waive rights.

Waiver – Express An explicit relinquishment of a right.

Waiver – Implied ... An implicit relinquishment of a right through behavior that seems to assume that the right does not exist.

Waiver of Sovereign Immunity Sovereign Immunity disallows an individual to sue a governmental entity; the waiver of sovereign immunity allows individuals to sue governmental entities under specific circumstances.

Warranty An ongoing assurance made by the insured that certain conditions in an insurance contract will be met (for example, that the insured will maintain functional fire alarms).

Workers Compensation form of insurance that covers medical costs and lost wages in the event of injury, disease, or disability sustained by an employee in the course of his work/ Purchased by employers.

Wrongful Death Act allows the individuals who are associated with a deceased person who was killed because of a negligent act to sue the responsible party.

 


Y

Yield Protection (Crop Insurance) See Revenue Protection (Crop Insurance)

 

 


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Related Information:

Basics of Adjusting

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Insurance – Glossary of Terms