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Definition
| Transferring pure risk (no gain) from individuals to a group. Pools large numbers of individual risks. Charges a small premium to each in a pool in exchange for protection. |
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Term
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Definition
| Cause of loss. Example: Wind. It may damage your roof. Some policies, such as the SFP, are "named or specified perils", meaning that if whatever happens to the structure is not named as a peril in the policy, there is no coverage. Other policies, such as the HO-3, are "all-risk" on the dwelling, meaning that whatever may happen is covered unless that peril is excluded. All-risk policies are sometimes called "open peril" policies. |
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Term
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Definition
| Damage resulting to the structure caused by a peril, such as fire or lightening, which are examples of direct or indirect loss. |
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Term
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Definition
| For example: a fire burns the house down. The burnt down house is a direct loss. |
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Term
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Definition
| Sometimes called a "consequential loss". Loss of rental value (loss of use) is an indirect loss that is covered on some policy forms. Losses of this nature are also called "time-element losses", since they occur over a period of time. |
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Term
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Definition
| Starting with DP-2 broad form fire policy. The contract promises to pay all covered property insurance loss to the building structure in full (without deduction for depreciation) IF the insured carries 80% of the full replacement cost of the structure as a policy limit at the time of loss. You can never recover more than the policy limit. |
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Term
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Definition
| The amount of money you could get for property in the market. The market value of the property may be higher or lower than the RC of the property, depending upon the location of the property and the current market conditions. |
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Term
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Definition
| A policy insured at a "stated value" means that the insured chooses a limit of coverage for the property. In the event of loss, the insurer will pay the claim in one of three ways, choosing whichever is least- the stated value; the cost to repair the property not to exceed the stated value; or actual cash value. A stated value policy does not guarantee that the stated value will be paid in the event of a total loss. When insuring property such as a classic car, "agreed value" is a better type of coverage. A policy with an agreed value (amount) means that in the event of a loss the insurer must pay either: the agreed value, or the cost to repair the covered property not to exceed the agreed value. |
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Term
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Definition
| The right to salvage belongs to both the insurer and the insured. If the insured requests to keep the salvage, the insurer will lower the claim amount paid. If the claim is paid in full, then the insurer owns the salvage and may sell it to offset their loss. If a claim is paid in full and the stolen item is found, it should be returned to the insurer, who may then offer to sell it back to the insured. The "salvage value" is the amount that insurer can get for the salvage after a total loss. |
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Term
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Definition
| This is a negligence term, meaning that a party's negligence must be the proximate cause or reason for the resulting injury to others. Generally, there must be a direct chain of events leading from the negligent act up to the resulting injury or property damage in order for the negligent act to be considered the proximate cause. |
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Term
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Definition
| The amount the insured must pay on EVERY CLAIM. The purpose of the deductible is to discourage the insured from turning in small claims to the insurance company. The higher the deductible, the lower the premium. |
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Term
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Definition
| The policy limits. On HO policies, the cost of defense (hiring a lawyer) is in addition to limits. On property, or SFP, the policy will pay ACV, or the policy limits, whichever is less. Limits are shown in the policy's dec pages. |
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