Glossary of Terms

ADMITTED COMPANY

An insurance company domiciled in and licensed do business in a particular state.

BOILER AND MACHINERY INSURANCE

Also called Equipment Breakdown insurance. Covers damage caused by the breakdown of boilers, and/or related equipment including air conditioners, heating, and electrical systems.

BUSINESS INCOME (BUSINESS INTERUPTION) INSURANCE)

Pays for loss of income due to a covered property loss.

CLAIMS MADE POLICY

A claim has to both occur and be made within the policy period or within a specified term after expiration.

COINSURANCE

Requires policyholder to carry a limit insurance equal to a specified percentage of the total value of property to receive full payment on a partial or total loss.

COMMERCIAL GENERAL LIABILITY INSURANCE / CGL

A policy pays those sums that an insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage to which the insurance applies. The insurance company also has the right and duty to defend any suit seeking damages.

COMPLETED OPERATIONS COVERAGE

Pays for bodily injury or property damage resulting from a project or job that has already been completed.

DEDUCTIBLE

The amount of a claim paid by the policy holder. Usually in increments of $100, $250, $500, $1000 etc.. Example: $10,000 claim and policy has a $1,000 deductible. Insurance company pays $9000. Insured pays $1,000.

EMPLOYEE DISHONESTY/FIDELITY COVERAGE

Insurance against claims resulting from the dishonest acts of employees. (i.e. embezzlement, theft, forgery etc).

EMPLOYMENT PRACTICES LIABILITY COVERAGE

Covers against claims made by employees against employers for wrongful termination, discrimination, sexual harassment etc.

NON-ADMITTED INSURER

An insurer that legally does business within a state where it is not officially domiciled and usually sells coverages that are not available through “admitted” carriers. Non admitted insurers do not participate in state insolvency (guarantee) funds.

OCCURRENCE POLICY

Pays for claims that are deemed to have “occurred” within the policy period, but can be made after the policy has expired.

ORDINANCE OR LAW COVERAGE

Endorsement to a property policy that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built.

PRODUCT LIABILITY INSURANCE

Protects an insured from claims that result from the product made or manufactured by the insured.

PROFESSIONAL LIABILITY INSURANCE

Insurance to defend and indemnify professionals who give advice that results in financial loss to the parties they serve.

PROOF OF LOSS

Documents confirming to the insurance company that a loss has occurred.

REPLACEMENT COST

Insurance that pays the amount needed to replace damaged personal property or structures without deducting for depreciation, but limited by the maximum dollar amount subject to the limits shown on the policy.

SURETY BOND

A financial guarantee given by a surety company to protect an obligee from loss in the event the terms of a contractor are not fulfilled. The surety company assumes responsibility for the non performance of the principle (the party who purchased the bond).