Giving up the proprietary rights in insured property to the Underwriter in exchange for payment of a constructive total loss.


Act of God

A flood, an earthquake or other accident or event that is without any human intervention and that could not have been prevented by reasonable care or foresight but is the result of natural causes.



An individual representing the insurance company and acting for the company in working on agreements as to the amount of a loss and the liability of the company in same.


All Risk

Insurance against loss or damage to property arising from any fortuitous cause, except such as may be specifically excluded.



A survey of property made for determining its insurable value or the amount of loss sustained.  


Claims-Made Coverage

A policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current reporting year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered. (Contrast this with "Occurrence Coverage").  


Consequential Loss

A loss arising indirectly from an insured peril.  


Contractual Liability

Liability assumed under any contract or agreement. Coverage is generally limited in liability policies, but in most cases may be provided for an additional premium.  



The duty of the Assured and his broker to tell the Underwriter every material circumstance before acceptance of the risk.  


Discovery Period

The time allowed the insured after termination of certain bond and policy provisions to discover that he has sustained a loss which occurred during the period covered by the contract.  


Effective Date

The date on which an insurance policy or bond goes into effect, and from which protection is furnished.  



A form attached to the policy bearing the language necessary to change the terms of the policy to fit special circumstances.  



State of being subject to the possibility of loss;

Extent of risk as measured by payroll, gate receipts, area, or otherwise;

Possibility of loss to a risk being caused by its surroundings.


Good Faith

A basic principle of insurance. The Insured and his broker must disclose and truly represent every material circumstance to the Underwriter before acceptance of the risk. A breach of good faith entitles the Underwriter to avoid the contract. (Proposed changes in law may affect this definition - also see "Utmost Good Faith".)  



A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises, and uninspected boilers are Hazards.  


Held Covered

A provisional acceptance of risk, subject to confirmation at a later date that the agreed cover is needed. Where applicable to an existing insurance, cover is conditional, in practice, on prompt advice to the Underwriter as soon as the Assured is aware of the circumstances to be held covered coming into effect, and a reasonable additional premium is payable if the risk held covered comes into effect.  


Hold Harmless Agreement

A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts like leases. A typical lease may provide that the lessee must "hold harmless' the lessor for any liability from accidents arising out of the premises.



To restore the victim of a loss, in whole or in part, by payment, repair or replacement.  


Insurable Risk

A risk which meets most of the following requisites: 

The loss insured against must be defined;

It must be accidental;

It must be large enough to cause hardship to the insured;

It must belong to a homogenous group of risks large enough to make losses predictable;

It must not be subject to the same loss at the same time as a large number of other risks;

The insurance company must be able to determine a reasonable cost for the insurance;

The insurance company must be able to calculate the chance of loss.



Broadly, any legally enforceable obligation.  


Liability Limits

The sum or sums beyond which a liability insurance company does not protect the insured on a liability policy.


Minimum Premium

The smallest premium which an insurance company will accept for writing a particular policy or bond for a designated period.  


Named Insured

Any person, firm, or corporation, or any member thereof, specifically designated by name as insured(s) in a policy as distinguished from the others who, though unnamed, are protected under some circumstances.  


Open Cover

An agreement whereby the Assured undertakes to declare every item (e.g. shipment, vessel, etc. as appropriate) that comes within the scope of the cover in the order in which the risk attaches. The insurer agrees, at the time of concluding the contract, to accept all valid declarations up to the agreed limit for each declaration. An open cover may be for a fixed period or always open; subject to a cancellation clause.  


Package Policy

An insurance policy including two or more lines or types of coverages in the same contract.  


Partial Loss

A loss under an insurance policy which does not either

completely destroy or render worthless the insured property; or 

exhaust the insurance applying thereto.  


Personal Injury

Injury other than bodily injury arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation of a person's right to privacy committed other than in the course of advertising, publishing, broadcasting, publishing, or telecasting.  


Pre-Certification Authorization

A cost containment technique which requires physicians to submit a treatment plan and an estimated bill prior to providing treatment. This allows the insurer to evaluate the appropriateness of the procedures, and lets the insured and the physician know in advance which procedures are covered and at what rates benefits will be paid.  



Amount recovered from a third party responsible for a loss on which a claim has been paid.  



Payment of an amount of money related to the amount of loss to or on behalf of the insured upon the occurrence of a defined loss.  



Putting a lapsed policy back in force;

The payment of a claim under some forms of insurance reduces the principal amount of the policy by the amount of the claim. Provision is usually made for a method of reinstating the policy to its original amount.  


Replacement Cost

The cost of replacing property without deduction for depreciation.  


Retroactive Date

Date on a "claims made" liability policy which triggers the beginning of insurance coverage. A retroactive date is not required. If one is shown on a policy, any claim made during the policy period will not be covered if the loss occurred before the retroactive date.  



A fortuity. It does not embrace inevitable loss. The term is used to define causes of loss covered by a policy.  



A list of specified amounts payable for, usually, surgical procedures, dismemberments, ancillary expenses or the like in Health Insurance policies;

The list of individual items covered under one policy as the various buildings or animals and other property in property insurance;

In Marine policies, a list attached to a slip, open cover, policy or other document, usually detailing the rates of premium for various voyages, interests and risks.


Subrogation Waiver

A waiver by the named insured giving up any right of recovery against another party. Normally an insurance policy requires that subrogation (recovery) rights be preserved.  


Umbrella Liability

A liability policy designed to provide liability protection above and beyond that provided by standard liability contracts.  



A person trained in evaluating risks and determining the rates and coverage that will be used for them;

An agent, especially a life insurance agent, who might qualify as a "field underwriter."  


Waiting Period

A period of time between the beginning of a disability and the date benefits begin.  


Waiver Clause

A clause which entitles both Underwriter and Assured to take measures to prevent or reduce loss without prejudice to the rights of either party.  



A statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the untruth may not have been known to the person giving the warranty, the contract may be voided whether or not the untruth or inexactness is material to the risk.  


Without Prejudice

The claim is paid on this occasion, although the Underwriter feels it does not attach to the policy, but this action must not be treated as a precedent for future similar claims.

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