Home Insurance Definitions

A

Abandonment Clause
A clause that prevents the insured from abandoning his or her property in order to claim a total loss.

Account Premium Modification Plan
A rating plan for fire, property damage, and time element coverage.

Actuary
A professional trained in the mathematics of insurance and risk management. Known as a mathematician in most countries outside the United States.

Additional Living Expense Insurance
Coverage of additional living expenses that may be incurred by maintaining temporary residence, when forced to do so upon the loss of one's own property.

Adjuster
A person who investigates and settles insurance claims.

Administrative Costs
Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs and risk management.

After Charge
An insurance company authorized to do business in a given state.

Age Limits
The ages below or above which the insurance company will not issue a given policy or renew a policy in force.

Agent
A person who sells insurance products of the insurance company; the person responsible for your insurance coverage needs.

Agreed Amount Clause
An agreement between the insured and the insurer to cover automatically the necessary level of insurance to satisfy the coinsurance clause.

Alien Insurance Company
An insurance company incorporated under the laws of a foreign country .

Amount Subject
The maximum amount that underwriters estimate could be lost in the event of a disaster.

Appurtenant Structures
Secondary buildings on the same premises as a primary building covered under a property insurance policy.

Arbitration Clause
A provision requiring a neutral umpire to be appointed when the insurer and the insured cannot agree on a claim settlement, along with an appraiser from each side.

Assigned Risk
A risk assigned to insurers by law, which they may not otherwise accept.

Automatic Increase In Insurance Endorsement (Inflation Guard Endorsement)
Coverage that automatically increases to account for inflation and increases in building replacement costs; usually corporate.

Automatic Reinstatement Clause (Loss Clause)
A requirement to restore the original limit to a policy after a partial loss has been paid.

B

Basic Coverage Form
Commercial or personal property forms providing basic coverage.

Blanket Insurance
A form of property Insurance that covers multiple properties in a single contract.

Block Policy
An all-risk policy covering stock, property being transported, property in bailment, and property of the insured on others' property.

Broad Form
Policies that provide coverage for perils over and above standard perils.

Broad Theft Coverage Endorsement
Provides theft coverage for a named insured who occupies the building he or she owns.

C

Cancellation
The termination of insurance coverage during the policy period.

Claim
A formal request for payment of a loss under an insurance contract.

Claimant
The first or third party. That is any person who asserts right of recovery.

Clause
A section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage.

Coinsurance Clause
A clause having the insured share losses to the extent that his or her insurance is not sufficient to cover damages.

Commission
Paid to the insurance agent as compensation.

Composite Rate
A uniform premium applicable to all those eligible in a subscriber group, regardless of the number of claimed dependents. This is common among plans purchased by large employer groups.

Concurrent Causation
Two or more perils acting together to create a loss.

Concurrent Insurance
Two or more policies with the same conditions and coverage for the same interest in the same property.

Consequential Loss or Damage
(a) An indirect loss coming from a policyholder not using the property over a certain period. (b) A loss not covered directly, such as food spoilage.

Cromie Rule
A guide or method to distribute losses under nonconcurrent policies (not the same as the coverage provided).

Crop Insurance
Provides protection for crops from hail, fire, windstorms, etc.

D

Data Processing Coverage
Covers protection from breakdown of data processing systems, and the expense of repairing them.

Debris Removal Clause
A clause that covers expenditures resulting from removal of debris caused by an insured peril.

Declaration
The portion of an insurance contract (other than life or health insurance) that states the name and address of the insured, the property insured, it's description, policy period, amount of coverage, and statement of premiums.

Decline
An insurance company refuses to accept the request for insurance coverage.

Demolition Clause
A provision that excluding liability for costs of demolishing undamaged property.

Demolition Insurance
A provision to cover the cost of demolition on buildings that would otherwise be excluded under the demolition clause.

Direct Loss or Damage
A loss sustained as a direct consequence of a certain peril. Fire damage to a stove would apply, but food spoilage in a refrigerator would constitute an indirect loss.

Disappearing Deductible
A deductible that gradually disappears as a loss grows.

Divisible Contract Clause
A clause that guarantees that if a policy's conditions are violated at one insured location, coverage will be maintained at other insured locations.

Dwelling Forms
A policy form to cover a dwelling building, the personal property contained in it, and certain other items.

Dynamo Clause (Electrical Exemption Clause)
A clause to exempt electrical appliances from coverage, unless fire ensues.

E

Earth Movement
Coverage including landslides, mud flows, earth sinking, rising, or shifting, and earthquakes. Normally excluded on homeowners' property policies.

Earthquake Insurance
Coverage for damages caused by an earthquake.

Easement
An interest in land that grants permission for specific uses (for someone other than it's owner).

EC (Extended Coverage)
A common extension of property insurance, which covers fire and lightning damage.

EDP Coverage (Electronic Data Processing Coverage)
Special coverage for computer equipment, data systems, and expenses or lost income resulting from their loss.

Effective Date (Inception Date)
The date on which an insurance policy coverage starts.

Electrical Exemption Clause (Dynamo Clause)
A clause to exempt electrical appliances from coverage, unless fire ensues.

Electronic Data Processing Clause (EDP Clause)
Special coverage for computer equipment, data systems, and expenses or lost income resulting from their loss.

Elevator Collision Coverage
Coverage for damage resulting from an elevator collision.

Endorsement (Rider)
Amendment to the policy used to add or delete coverage.

Engineer (Loss Prevention Engineer or Safety Consultant)
Assists insurers with loss prevention, and providing underwriting and rating information.

Exclusion
Certain causes and conditions, listed in the policy, which are not covered.

Experience Rating
Determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk's own past claim experience.

Experience
The record of claims made or paid within a specified period.

Expiration Date
The date on which the policy ends.

Extended Coverage (EC)
A common extension of property insurance, which covers fire and lightning damage.

F

FAIR Plan
Fair Access to Insurance Requirements. A U.S. government program to provide insurance to those in inner-city or high risk areas, who could not otherwise secure coverage.

Fair Rental Value Coverage
Covers loss of rental value, minus expenses, when the property is damaged

Fallen Building Clause
Negates fire coverage if a material part of an insured buildings collapses for other reasons, such as fire or explosions.

Farm Personal Property
Scheduled or unscheduled classes of farm property, which may include feed, grain, livestock, and farm supplies.

Farm Property Coverage Form
A farm coverage form to cover residential dwellings and household and farm property.

Farmowners-Ranchowners Policy
Provides coverage to farm buildings, contents, and liability coverage.

Federal Crop Insurance Coverage
A U.S. federal government agency that provides crop insurance.

Financial Ratings
Reflects the financial strength of insurance companies, and their ability to meet their obligations to their policyholders. Major rating organizations include Standard & Poor's, Moody's, and AM Best.

Fire Legal Liability
A policy to cover liability from negligent actions on the part of the insured, which result in destruction of property.

Fire
For property insurance, it must be 'hostile,' meaning that fire must occur in a location where it is not intended to be.

Flat Cancellation
The cancellation of a policy as of it's effective date, without any premium charge.

Flat Deductible
A deductible of a specific amount for each claim, as opposed to a disappearing or franchise deductible.

Flood Insurance
Reimburses property owners from losses caused by a flood.

Foundation Exclusion Clause
A provision in a fire insurance contract excluding the foundation from a property valuation.

Full Reporting Clause
Requires an insured to report values every so often, and states a penalty for failing to report said values.

H

Hail Insurance
Coverage for loss of crops as a result of hail.

Homeowners' Policy
Property and liability insurance for homeowners and renters.

Honesty Clause (Full Reporting Clause)
Requires an insured to report values every so often, and states a penalty for failing to report said values.

Household Personal Property
Any household goods, furniture, and personal belongings of residents of a farm dwelling (as opposed to farm equipment, covered under Farm Personal Property).

I

In Kind
The right of the insurer to replace damaged objects, instead of providing a cash payout.

Increased Cost of Construction Insurance
Covers any increased costs of construction to a damaged or destroyed building.

Increased Hazard
Property insurance that is suspended if the risk is determined to have increased beyond the level expected when the policy was originally written.

Indirect Damage (Indirect Loss)
Losses not caused directly by a peril (such as food spoilage in a refrigerator).

Inflation Guard Endorsement (Automatic Increase In Insurance Endorsement)
Coverage that automatically increases to account for inflation and increases in building replacement costs; usually corporate.

Inherent Vice
A fault in property that leads to it's self-destruction, usually excluded from most policies.

Inspection Bureau
An organization created by property and liability insurers to set rates; many bureaus are called 'inspection bureaus,' especially those that set fire rates for property contracts.

Institutional Policy
Property given special treatment by certain package policies; usually applies to government and nonprofit organizations.

Iron Safe Clause
A property insurance policy that requires records to be stored in a safe.

ISO (Insurance Services Office)
An insurance organization that obtains statistics, and sets rates and policies.

K

Kinne Rule
A formula to deal with adjustments to property insurance losses when concurrent insurance policies exist.

L

Leasehold Interest Insurance
A type of property insurance covering loss of a lease should it be terminated due to damage covered under the contract.

Limit of Liability
A procedure to allocate property insurance losses among various insurers for a specified property.

Limited Theft Coverage Endorsement
Provides theft coverage for named person who is not the owner occupant.

Line Card
A property insurer's record of all insurance sold.

Livestock Insurance
Provides coverage of a specific amount upon the death of any animal covered by the policy.

Livestock Mortality Insurance
Life insurance for livestock.

Livestock Transit Insurance
Insurance for livestock while in transit.

Loss Assessment Charge
The insured's share of a loss assessment charged by a corporation or association of property owners. Provides some coverage for loss assessments against the insured as owner or tenant.

Loss Clause (Automatic Reinstatement Clause)
A requirement to restore the original limit to a policy after a partial loss has been paid.

Loss of Use Insurance
Compensates for the loss of property if it cannot be used.

Loss Payable Clause
Allows persons other than the insured to be compensated. Protects the lender where there is a lien or loan on a given property.

Loss Prevention Engineer (Safety Consultant)
Assists insurers with loss prevention, and providing underwriting and rating information.

M

Mathematician
A professional trained in the mathematics of insurance and risk management. Known as an actuary in the United States.

Maximum Foreseeable Loss (Amount Subject)
The maximum amount that underwriters estimate could be lost in the event of a disaster.

Minimum Rate
A rate for low hazard risks.

Misquote
An incorrect estimate of the insurance premium.

Mobile Home Policy
A Homeowners policy for a mobile home that stays in one place.

Mortgage Clause (Mortgagee Clause)
Coverage for mortgaged property, specifying that reimbursement be paid to the mortgagee, without defeating his or her rights of recovery.

Multiple Location Policy)
Coverage for several properties, owned by one person.

N

Named Perils
Causes of damage to property that are specifically listed on a policy.

National Flood Insurance Program (NFIP)
U.S. program that provides flood insurance for fixed property.

Nonconcurrency
Exists when several policies for the same property for the same perils extend different levels of coverage. Has become less and less frequent.

O

Occupancy
Reflects the type of use of a given property, which affects it's desirability and policy rate.

Off Premises
A clause to expand coverage beyond the property of the premises.

Open Policy
A policy whose limits of liability are set for the protection offered; no deposit is required, and no expiration date is specified.

Ordinary Construction
A building in which areas of high flammability are hidden by the interior finish.

Other Structures
Structures not attached to an insured property, such as a garage or shed; dwelling and homeowner policies usually provide coverage.

P

Personal Property Floater
A Broad Form policy, covering all of one's property, regardless of it's location.

Personal Property
Any property other than real property, which is protected under most homeowner policies for family members.

Pluvious Insurance
Another name for rain insurance.

Policy Lapse (Lapse in Coverage)
A period during which a policy has been canceled or terminated by the insurance company for a variety of causes.

Policy Limit
The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Period
The time in which a policy is in effect.

Policy
A written insurance contract; can include forms, riders, endorsements, and attachments.

Policyholder
Literally, the person who has possession of the policy; can refer to the policy owner and those covered under the policy. Thus the term is non-functional as commonly used.

Power Interruption Insurance
Covers loss of power.

Preferred Risk
A risk considered better than that on which a premium was calculated.

Premium Financing
When a policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Premium
The amount of money an insurance company charges for insurance coverage.

Pro Rata Distribution Clause
A provision of blanket form policies that divides insurance coverage among it's subjects, commensurate with the value of each subject in relation to the total items covered by the policy.

Property Insurance
Insurance that indemnifies someone for the loss of his or her property or the income that it produces.

Protected Risk
A property risk that is within the geographical boundaries of a fire department.

Q

Quote
An estimate of the cost of insurance, based on information supplied to the insurance company by the applican't.

R

Rebate
A reduction of a premium.

Red-Lining
Unfair discrimination on the part of the insurance company against insuring a given property solely because of it's location.

Reinstatement
The restoring of a cancelled policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.

Reinsurance
A form of insurance that insurance companies buy for their own protection.

Removal
Removal of property to protect it from loss.

Renewal
The process by which someone can keep an existing policy in effect.

Replacement Cost Insurance
Insurance for which losses are paid on the basis of their replacement costs.

Residence Premises
The building in which the insured lives, as part of homeowners' insurance.

Rider (Endorsement)
Amendment to the policy used to add or delete coverage.

Risk
A term used to designate an insured or a peril insured against.

S

Safety Consultant (Loss Prevention Engineer)
Assists insurers with loss prevention, and providing underwriting and rating information.

Salvage Corps
An organization, set up by insurance companies, which works to limit damage to property during or after a fire.

Schedule
A list of specific items and buildings covered under a policy.

Short-Rate Cancellation
When the policy is terminated prior to the expiration date at the policyholder's request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish it's own short-rate schedule.

Single-Interest Policy
Insurance for only one party having an interest in property (such as the mortgagee but not the mortgagor).

Smoke Damage
Damage from smoke, not fire.

Specific Rate
A rate for a specific property.

Stated Amount
An amount to be paid in the event of total loss, regardless of the property's actual value.

U

Underwriting
The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Unearned Premium
The part of a premium left on a given policy term.

Unoccupied
Furnished property in which no one lives; fire policy prevents a property from being unoccupied beyond a given period.

V

Vacan't
Property that has nothing in it, and is unfurnished; fire policy prevents a property from being unoccupied beyond a given period.

Valuable Papers and Records
Insures all physical loss or damage to valuable papers and records, except money.

Valued Policy
A policy providing a specific amount to be paid in the event of total loss; this eliminates the need to determine the actual cash value of the property.

W

Warranty Policy
A policy from a reputable company, which is used to obtain additional coverage.

Water Damage Clause
Coverage for certain water damage, such as leakage or plumbing problems.

Water Damage Insurance
Coverage against damage caused by high waves or tides.

Whole Dollar Premium
Premiums rounded up to the nearest dollar (any amount of 51 cents or more); lesser amounts are typically eliminated entirely.

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