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Insurance Glossary

Common Terms Used In Transportation Insurance

Actual Cash Value – repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation

Adjuster – a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held

Agent – an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Aggregate – the maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

Appraisal – an estimate of value.

Auto Liability – coverage that protects against financial loss because of legal liability for motor vehicle related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.

Auto Physical Damage – motor vehicle insurance coverage (including collision, vandalism, fire and theft) that insures against material damage to the insured’s vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.

Bodily Injury – physical injury including sickness or disease to a person.

Bonds – a form of debt security whereby the debt holder has a creditor stake in the company. Obligations issued by business units, governmental units and certain nonprofit units having a fixed schedule for one or more future payments of money; includes commercial paper, negotiable certificates of deposit, repurchase agreements and equipment trust certificates.

Business Auto – coverage for motor vehicles, other than those in the garage business, engaged in commerce. Business auto filings include singularly or in any combination coverage such as the following: Auto Liability, PIP, MP, Uninsured Motorist and/or Underinsured Motorists (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Business owners Policy – business insurance typically for property, liability and business interruption coverage.

Claim – a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Claims Adjustment Expenses – costs expected to be incurred in connection with the adjustment and recording of accident and health, auto medical and workers’ compensation claims.

Class Rating – a method of determining rates for all applicants within a given set of characteristics such as personal demographic and geographic location.

Commercial Auto – coverage for motor vehicles owned by a business engaged in commerce that protects the insured against financial loss because of legal liability for motor vehicle related injuries, or damage to the property of others caused by accidents arising out of the ownership, maintenance, use, or care-custody & control of a motor vehicle. This includes Commercial Auto Combinations of Business Auto, Garage, Truckers and/or Other Commercial Auto.

Commercial Property – property insurance coverage sold to commercial ventures.

Deductible – Portion of the insured loss (in dollars) paid by the policy holder

Earned Premium – portion of insured’s prepaid premium allocated to the insurance company’s loss experience, expenses, and profit year- to –date

Endorsement – an amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

Hard Market – a market characterized by high demand and low supply.

Hazard – circumstance which tends to increase the probability or severity of a loss.

Hold-Harmless Agreement – A risk transfer mechanism whereby one party assumes the liability of another party by contract

Incurred Claims – paid claims plus amounts held in reserve for those that have been incurred but not yet paid.

Incurred Losses – sustained losses, paid or not, during a specified time period. Incurred losses are typically found by combining losses paid during the period plus unpaid losses sustained during the time period minus outstanding losses at the beginning of the period incurred in the previous period.

Inland Marine – coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as live animals, property with antique or collector’s value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.

Insurance – an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Insurance to Value – Amount of insurance purchased vs. the actual replacement cost of the insured property expressed as a ratio.

Insured – party(ies) covered by an insurance policy.

Insurer – an insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.

Lapse – termination of a policy due to failure to pay the required renewal premium.

Liability – a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a)    It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b)    The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c)    The transaction or other event obligating the entity has already happened.

Loss Ratio – the percentage of incurred losses to earned premiums.

Loss Reserve – the amount that insurers set aside to cover claims incurred but not yet paid.

Mechanical Breakdown Insurance – premiums attributable to policies covering repair or replacement service, or indemnification for that service, for the operational or structural failure of property due to defects in materials or workmanship, or normal wear and tear. (May cover motor vehicles, mobile equipment, boats, appliances, electronics, residual structures, etc.)

Named Insured – the individual defined as the insured in the policy contract. .

Named Peril Coverage – insurance for losses explicitly defined in the policy contract.

Negligence – failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

Occurrence – an accident , including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured. (Bickelhaupt and Magee)

Package Policy – two or more distinct policies combined into a single contract.

Peril – the cause of property damage or personal injury, origin of desire for insurance. “Cause of Loss”

Personal Auto Policy – coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.

Personal Injury Protection Coverage/PIP – automobile coverage available in states that have enacted no-fault laws or other auto reparation reform laws for treatment of injuries to the insured and passengers of the insured.

Personal Property – single interest or dual interest credit insurance (where collateral is not a motor vehicle, mobile home, or real estate) that covers perils to goods purchased or used as collateral and that concerns a creditor’s interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.

Policy – a written contract ratifying the legality of an insurance agreement.

Policy Period – time period during which insurance coverage is in effect.

Pure Premium – that portion of the premium equal to expected losses void of insurance company expenses, premium taxes, contingencies, or profit margin.

Rate – value of insured losses expressed as a cost per unit of insurance.

Salvage – value recoverable after a loss.

Soft Market – a buyer’s market characterized by abundant supply of insurance driving premiums down.

Subrogation – situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Subrogation – situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Unearned Premium – amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.

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