Working With Insurance for Recovery
Working With Insurance for Recovery
If you have a loss at your home or business, many restoration companies will work with your insurance and they will be able to help you determined what your coverage is.
However, for your own peace of mind, and in the case of not using a restoration company for your loss, it may be helpful to understand some insurance terms.
This list is not intended to provide legally binding definitions. It is meant to be used as a general reference tool.
ABSOLUTE LIABILITY---Liability that occurs where one has a duty to fill no matter what the circumstances may be. Absolute Liability is often found in cases involving explosives. In many automobile laws an insurance company may be responsible to a third party irrespective of any statutory faults or breaches on the part of the insured.
ACCIDENT---An unforeseeable event which may produce injury or property damage.
ACTUAL CASH VALUE---The cost of repairing or replacing damaged property with property of the same kind and quality and in the same physical condition; commonly defined as replacement cost less depreciation.
ACTUAL DAMAGES---Damage that really exists as distinguished from potential or possible damage.
ACTUARY---An insurance professional whose primary functions include the determination of rates and rating methods, evaluation of reserves and other statistic-related responsibilities.
ADDITIONAL INSURED---An individual or organization covered by an insurance policy other than the named insured in the policy declarations. In an automobile policy anyone who may drive a car with the owner’s consent is an additional insured but in most instances the additional insured must be named in an endorsement.
ADDITIONAL LIVING EXPENSE---The extra, above-normal costs of such expenses as food and lodging incurred while a home damaged by an insured peril is being repaired. These additional costs are covered in all forms of the homeowners policy.
ADJUSTER (Claim Representative)---A person who seeks to determine the amount of loss suffered when an insurance claim is submitted and who attempts to settle the claim.
AGENT---The independent agent is an independent businessperson who usually represents two or more insurance companies under contract in a sales and service capacity and who is paid on a commission basis. The exclusive agent represents only one company, usually on a commission basis. The direct writer is the salaried or commissioned employee of a single company.
ALL LINES---Refers to the writing of life and health lines with the property-liability lines through the same company. The term all lines suggests a limitless form of protection, whereas in fact there are still a number of lines of protection still not afforded by the so-called all lines concept.
APPLICATION---A formal request for insurance consisting of statements, declarations or warranties describing the risk. Used by the insurer to determine acceptability, coverage, conditions, and amount of premium.
APPORTIONMENT---The dividing of a loss proportionately among two or more insurers which cover the same loss.
APPRAISER – May or may not be an adjuster…Appraiser determines the value of the loss…the one person who in the claim process who sees property involved in the claim.
APPRECIATION---Rise in value or price. Contrast with DEPRECIATION.
APPURTENANT STRUCTURES---Buildings on the same premises as the main building insured under a property insurance policy.
ARBITRATION---A binding procedure to settle a dispute between an insurance company and an insured over a claim settlement by placing the decision in the hands of an appraiser appointed by each party to the dispute and a third disinterested person selected by the two appraisers.
ARSON---The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.
ASSETS---As applicable to insurance, all funds, property, goods, securities, rights of action or resources of any kind owned by an insurance company, less such items as are declared non-admissible by state laws, including deferred or overdue premiums.
BAD FAITH – Breach of faith, willful failure to respond to plain well-understood statutory or contractual obligations. Plaintiff attorney will cry “bad faith” against insurance companies.
BAIL BOND---A bond which guarantees the appearance of a person in court, and which is subject to forfeiture if that person violates the provisions of the bond.
BAILEE---One who has temporary possession of property belonging to another.
BASIC EVALUATION REPORT---A report prepared by loss prevention, usually at the request of underwriting, which provides the underwriting department with necessary information to underwrite prospects or policyholders.
BASIC LIMITS---The lowest amount prescribed by law or the company for which a liability policy can be written.
BLANKET COVERAGE---Insurance covering more than one item of property at a single location or two or more items of property in different locations.
BOND---Generally speaking, an agreement whereby one party, called the surety, obligates itself to a second party, called the obligee, to answer for the default of a third party, called the principal.
BROAD FORM---A package policy providing coverage for the same perils covered in the basic form, plus specified additional perils.
BROKER---A marketing specialist who represents buyers of property and liability insurance and who deals with either agents or companies in arranging for the coverage required by the customer.
BUSINESS INCOME INSURANCE---Protection for a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. The insurance provides reimbursement for lost net profits and necessary continuing expenses.
CANCELLATION---Termination of an insurance policy or bond by an insurance company or a policyholder before its expiration date.
CAPTIVE INSURER---An insurance company set up by a company or group of companies to insure their own risks or risks common to the group.
CASUALTY INSURANCE---Insurance concerned primarily with the insured’s legal liability for injuries to others or for damage to other persons’ property; also encompasses such forms of insurance as plate glass, burglary, robbery and aviation.
CASTASTROPHE---In insurance, a term applied for statistical recording purposes to an incident or a series of related incidents involving an insured loss expected to exceed $25 million.
CERTIFICATE OF INSURANCE---A statement issued by an insurer verifying a policy has been written and issued. States policy number, coverage, effective and expiration dates, etc. Used frequently in group policies where master policies are issued to companies.
CLAIM---A demand to recover under an insurance policy for a loss covered by that policy.
CLAIM EXPENSE – The expense of adjusting a claim, such as investigation and attorney’s fees. It does not include the cost of the claim itself.
CLAIM REPRESENATIVE (ADJUSTER) – Insurance Company employee who determines if claim is meritorious and who settles the claim. Only one person knows the claim better…the claimant.
COINSURANCE---A provision in an insurance policy under which the insured, for a reduced rate, agrees to carry a certain amount of insurance expressed as a percentage of value of his or her property. It provides for the full payment, up to the amount of the policy, of all losses if the insurance carried is at least equal to the specified percentage. However, if the insured fails to carry the necessary amount of insurance, he or she assumes a proportionate share of the loss.
COMBINED RATIO---The sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written.
COMMERCIAL LINES---Insurance for businesses, organizations, institutions, governmental agencies or other establishments.
COMPREHENSIVE PERSONAL LIABILITY INSURANCE---Protection for an insured against loss arising out of the policyholder’s legal liability to pay money for damage or injury to others. Does not include automobile liability or business operations.
COMPULSORY INSURANCE---Any form of insurance which is required by law.
CONSEQUENTIAL LOSS---A loss resulting from, but not caused directly by, an insured peril. For example, if a fire should damage refrigeration equipment, any spoilage of its contents resulting from the loss of refrigeration would be a consequential loss.
CONTINGENT LIABILITY---The liability of individuals, corporations or partnerships for accidents caused by persons other than employees, for whose acts or omissions the individuals, corporations or partnerships are legally responsible.
CONTRIBUTORY NEGLIGENCE---The lack of care on the part of an individual, which helped, cause an accident. A claim where an individual who helped cause an accident by failing to exercise proper care in negated or defeated by the doctrine of contributory negligence, even if the other party is also negligent.
DEDUCTIBLE---An amount of a loss a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss. Insurance is written on this basis at reduced rates.
DEPRECIATION---A decrease in the value of property due to wear and tear or obsolescence.
EMPLOYERS LIABILITY COVERAGE--- A section of the workers’ compensation policy which provides coverage against the common law liability of an employer for injuries to employees as distinguished from the liability imposed by a worker’s compensation law.
ENDORSEMENT---A form attached to an insurance policy to add to, alter or vary its provisions.
ERRORS AND OMISSIONS INSURANCE---A form of insurance that indemnifies the insured for any loss sustained because of an error or oversight on his or her part.
EXCESS LIMITS---Coverage against losses in excess of a specified dollar limit.
EXCLUSION---A provision in an insurance policy, which denies coverage for certain, perils, persons, property or location.
EXPENSES RATIO--- The cost of acquiring, writing and servicing business as a percentage of written premiums.
EXPERIENCE RATING---A method of establishing insurance rates based on an individual policyholder’s loss record.
EXPOSURE---The state of being subject to the possibility of loss; the extent of risk as measured by various standards such as payroll, gate receipts and area.
EXTENDED COVERAGE INSURANCE---Protection against property damage caused by windstorm, hail, smoke, explosion, riot, riot attending a strike, civil commotion, vehicle and aircraft. This is provided in conjunction with the fire insurance policy and various “package” policies.
FAIR (FAIR ACCESS TO INSURANCE REQUIREMENTS) PLAN---A facility to make fire insurance and other forms of property insurance readily available to persons who have difficulty obtaining such coverage.
FIDELITY BOND---A form of protection, which reimburses an employer for losses caused by dishonest or fraudulent acts of employees.
FIRE INSURANCE---Coverage for losses caused by fire, lightning and the removal of property from endangered premises, plus resultant damages caused by smoke and water.
FLOATER---A form of insurance that applies to movable property, whatever its location, within the territorial limits imposed by the contract. The coverage “floats” with the property.
FLOOD INSURANCE---Coverage against loss resulting from the flood peril.
FRAUD---Deception or strategy used to deceive or cheat, including misrepresentation or concealment.
GENERAL LIABILITY INSURANCE---Form of coverage that pertains, for the most part, to claims arising out of the insured’s liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of elevators and the like, as well as services.
HOLD HARMLESS AGREEMENT---A contract under which one party’s legal liability for damages is assumed by the other party to the contract.
HOMEOWNERS POLICY---A package type of insurance for the homeowner that includes coverages ranging from fire and extended coverage, theft and personal liability to coverage for all perils except those specifically excluded.
INDEMNIFY---To provide financial compensation for losses.
INDEPENDENT ADJUSTER – An adjuster who works as an independent contractor, hiring out to insurance companies or other organizations for the investigation and settlement of claims.
INLAND MARINE INSURANCE---A broad type of insurance, generally covering articles that may be transported from one place to another as well as bridges, tunnels and other instrumentalities of transportation and communication. It includes goods in transit (generally excepting trans-ocean) as well as numerous “floater” policies such as those covering personal effects, personal property, jewelry, furs, fine arts and others.
INSURANCE---A system under which individuals, businesses and other organizations or entities, in exchange for payment of a sum of money (a premium), are guaranteed compensation for losses resulting from certain causes under specified conditions.
INSURED---The person(s) or corporation whose insurable interest is protected by the policy. Also called ASSURED.
JETTISON---To throw overboard part of a ship’s cargo in order to save the ship.
LEGAL EXPENSE INSURANCE---Insurance to reimburse policyholders for legal fees incurred for defense from lawsuits involving areas of civil law not covered by standard liability insurance. Some examples: discrimination, wrongful discharge, suites by a government entity, contract disputes, bill collection, landlord-tenant disputes, patent disputes.
LIABILITY INSURANCE---Insurance covering the policyholder’s legal liability for injuries to other persons or damages to their property.
LOSS OF USE INSURANCE---Compensation through insurance for loss caused because the policyholder has lost the use of his property. An automobile hired to replace one stolen would be an example of the need and use of such coverage.
LOSS RATIO— The percentage of premiums (usually earned premiums) used to pay losses and loss adjustment expenses.
LOSS RESERVE--- An amount representing an insurer’s estimated liability for unpaid insurance claims or losses that will have to be paid in the future.
MATERIAL MISREPRESENTATION---False facts or circumstances stated by an insured, which would have resulted in no coverage, if the true facts were known to the insurer.
MECHANICS’ LIEN--- Protection given to laborers and suppliers in the form of a lien on the property that has been improved.
MULTI-PERIL POLICY— A package policy which provides coverage against several different perils.
MUTUAL INSURANCE COMPANY---An incorporated insurance organization owned by its policyholders.
NAMED PERILS---Perils specified in a policy as those against which the policyholder is insured.
NOTICE OF LOSS---A written notice to an insurance company from a person who has sustained a loss, giving notice to the company that the loss has occurred.
OBLIGEE---A person, firm, corporation, or government agency protected by a surety bond.
PERIL---The cause of a loss insured against in a policy.
PERSONAL ARTICLE FLOATER---A policy or an addition to another policy, used to cover personal valuables such as furs and jewelry.
PERSONAL LINES---Those types of insurance, such as auto or home insurance, for individuals or families rather than for businesses or organizations.
PHYSICAL DAMAGE---A term indicating actual damage to property.
POLICYHOLDER---A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance.
PROOF OF LOSS---A written statement made by the policyholder for the insurer regarding a claim so that the insurer may determine its liability under the policy.
PROPERTY INSURANCE---Insurance providing financial protection against the loss of, or damage to, property caused by specified perils.
PUBLIC ADJUSTER – An insurance adjuster who represents an insured on a fee basis in claim settlement.
REPLACEMENT COST---The cost of replacing property without a deduction for depreciation.
RESERVE--- (1) An amount representing actual or potential liabilities designated by an insurer to cover obligations to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.
RISK MANAGEMENT---Management of the varied risks to which a business firm or corporation might be subject. It involves analyzing all exposures to gauge the likelihood of loss and determining how to minimize losses by such means as insurance, self insurance, reduction or elimination of risk or the practice of safety and security measures.
SELF-INSURANCE---An arrangement through which some firms and individuals plan to assume all or a portion of their own losses. Self-Insurers often establish special funds for this purpose, and purchase insurance to cover losses in excess of predetermined amounts.
SPECIAL INVESTIGATIONS UNIT – The investigative unit for the insurance company who assist claim reps and sometimes underwriting in making claims and underwriting decisions by conducting outside investigations.
SUBROGATION---The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another who is legally liable for it.
SURETY BOND---An agreement providing for monetary compensation should there be failure to perform specific acts within a stated period. The surety company, for example, becomes responsible for fulfillment of a contract if the contractor defaults.
TERM---A period of time for which a policy is issued.
THIRD PARTY---A person who seeks indemnification under a liability insurance policy.
TORNADO---A whirling wind, accompanied by a funnel-shaped cloud or column, very violet and destructive in a narrow path, often for many miles over the land.
TORT---A wrongful act, resulting in injury or damage, on which a civil action may be based. Does not apply to a breach of contract.
TOTAL LOSS---Loss to the insured of the entire value of goods or other property insured, or a loss entailing the payment of the full face amount of an insurance contract.
UMBRELLA LIABILITY---A form of insurance protection against losses in excess of the amount covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability policies.
UNDERINSURANCE---A condition in which not enough insurance is carried to cover the insurable value.
WAIVER---The surrender of a right or privilege which is known to exist.
WARRANTY---A statement made on an application for most kinds of insurance that is
warranted as true in all respects. If untrue in any respect, even though the applicant did
not know the untruth, the contract may be voided without regard to the materiality of the
WRITE---To insure, to underwrite, or to accept an application for insurance.