Insurance Terms to Know for Your Everyday Life


Insurance can easily become overwhelming, especially when they use words and terms that we might not fully understand. To help bring down the intimidation factor when dealing with your insurance, we have come up with a list from A to Z to easily define some of the terms often used.


The definitions in this glossary are not full legal definitions. They are intended to give you a quick idea definition.


Actual Cash Value – In most cases it is the cost to repair or replace the damaged property, minus depreciation.


Additional Insured – A person or organization not automatically included as an insured under an insurance policy but for whom a certain degree of insured status is arranged. A common "additional insured" is a mortgage holder.


Additional Named Insured – An additional person or organization added to policy and granted full coverage under the terms and conditions of the policy.


Adjuster — A representative of the insurer who helps determine the value and extent of the loss once a claim has been submitted.


Admitted/ Non-Admitted Insurance Company – An admitted company is an insurance company licensed or authorized to sell insurance in a given state. Non-admitted insurance companies do not have the protection afforded by the state’s guaranty fund.


Agent – An agent is a representative of the insurance company (not the policyholder). They are licensed by the state to solicit, negotiate, place insurance coverage, and provide services to the policyholder.


Aggregate Limit – The most the insurance company will pay for all covered events during a specified time period.


Arbitration Process by which an insurance company and the insured agree to settle a claim dispute by accepting the decision of a third party.


Assessed Value – Estimated value for real or personal property established by a taxing entity.


Benefit - Compensation for loss and other services provided by the insurance company under terms of the contract insurance that covers multiple buildings or people at one or multiple locations on a single policy.


Blanket – A single limit of insurance that applies over more than one location or more than one category of property coverage, or both.


Broker of Record Letter – an industry standard document that clarifies who represents the insured to the carrier.


Business Interruption Insurance – AKA Business Income Coverage. Covers loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations.


Business Owner's Policy (BOP) – A policy providing both property and liability coverage for eligible small businesses.


Certificate of Insurance – Proof of your insurance coverage.


Claims Made Coverage - A policy form that only covers claims reported during the policy period regarding an event that occurred during the policy period. Additional coverage may be made by purchasing coverage for prior acts or for events reported after the expiration of the policy.


Coinsurance - A policy provision by which the insured, in consideration of a reduced premium, agrees to carry an amount of insurance equal to a specified percentage of the total value of the property insured. This is not the same as coinsurance found in most health insurance policies.


Commercial Package Policy Provides a broad package of property and liability coverages for businesses other than those provided insurance through a Business Owner's policy.


Conditions Provisions of an insurance policy that state the rights and requirements of the insured party and insurer.


Declarations Page Part of an insurance policy that states the name and address of the policyholder, property insured, its location and description, the policy period, premiums and supplemental information.


Deductible – An amount the insurer will deduct from the loss before paying up to your policy limits.


Depreciation – The decrease in the value of property over a period of time, usually as result of age or wear and tear from use.


Directors and Officers Liability Insurance – Errors and omissions coverage for an organization, its leaders, and governing bodies while acting within the scope of their duties.


Employee Benefit Plan Insurance – Protects the employer against claims by employees and former employees from negligent acts or omissions in administering the insured’s employee benefit program.


Employment Benefit Program - a benefit program maintained by an employer for the welfare of employees and their dependents, such as group medical, life, or disability insurance, and pension or retirement plans.


Endorsement Written form attached to an insurance policy that amends the policy's insureds, coverage, terms or conditions.


Errors and Omissions Liability Protects the insured against liability for committing an error or omission (negligence or mistake) in performance of professional duties.


Functional Replacement Cost – In the event of loss, this valuation method replaces or repairs the structure using modern building techniques in lieu of obsolete, antique, or custom construction material and methods used in the original construction.


General Liability Insurance Designed to protect you from liability arising from accidents on your premises or through your operations, products sold or distributed by you, operations completed by you and contractual liability and for which you are alleged to be negligent.


Guaranty Fund – A fund based on assessments against solvent insurance companies used to provide payments for the losses of claimants made against insolvent insurance companies.


Hired and Non-Owned Auto Insurance Endorsement – Non-owned Auto Liability provides coverage for any auto that is not owned, borrowed or hired by the insured. Hired Auto Liability provides coverage for autos leased, hired, or borrowed by the insured. This endorsement is typically not available to insureds who have a policy covering other commercial automobile exposures.


Indirect Loss - consequential loss resulting from direct damage, for example: loss of rental income when a tenant is displaced due to a fire.


Inflation Guard — A property coverage endorsement that increases the policy's limits of insurance during the policy term to keep pace with inflation. The increases are tied to a specific index, which can vary by company or policy.


Liability Insurance — Pays on behalf of an insured for a loss arising out of legal liability to others.


Limit of Insurance – The most that will be paid by the insurer in the event of a covered loss under an insurance policy.


Loss Reserves Insurance company's best estimates of what it will pay for claims. These are readjusted periodically.


Negligence Failure to use a degree of care considered reasonable under the circumstances.


Occurrence An accident including continuous or repeated exposure to substantially the same general harmful conditions.


Pastoral Counselor Liability Insurance – Errors and omissions coverage for the insured and individual pastors and religious leaders in the provision of counseling services. Claims may arise from paid or unpaid counseling service.


Peril - A cause of loss.


Premium – The amount of money an insurer charges to provide the coverage described in the policy.


Professional Liability Insurance – Another name for errors and omissions insurance.


Primary Coverage - policy that responds initially to an insured loss


Reinsurance Insurance purchased by an insurance company for its own protection generally against either large cumulative losses or catastrophe losses.


Replacement Value – The cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation.


Rider – This is an additional piece of coverage added onto a larger insurance policy. It may also be called an endorsement.


Umbrella Insurance A policy generally written over your primary liability policies which can serve the purpose of providing coverage when the limits under your primary policies are exhausted by the payment of claims or providing coverage where the primary policies leaves off or don’t cover.


Workers’ Compensation Insurance Insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.


We hope that this list of terms will help you the next time you are managing your insurance. It can be a lot to keep up with and there are many other terms that insurance companies use. If you need more information or would like to request a free, no-obligation quote for your ministry, visit our website to request a quote or call us at 1-484-654-3380.


 

This content has been prepared by United Methodist Insurance Company (UMI) for informational purposes only. No article or document may accurately contemplate all possible scenarios or church resources. As such, this information is meant to foster discussion by the individual church and its members to develop a plan tailored to its own circumstances. UMI is providing this information with no warranties or guarantees of any kind and it should not be viewed as legal, financial, or other professional advice. All liability is expressly disclaimed. Any claim examples described herein are general in nature, may or may not be based on actual claims, and are for informational purposes only. Any coverage available for a claim is determined from the facts and circumstances of the claim as well as the terms and conditions of any applicable policy, including any exclusions or deductibles. In the event of a conflict with the content herein, the terms and conditions of any issued policy will control. Individual coverage may vary and may not be available in all states.

The commercial insurance coverages for United Methodist Insurance are sold and serviced directly or indirectly by Sovereign Insurance Agency (CA Lic. No. 0B01380) ("Sovereign") and underwritten by various available insurance markets. Sovereign pays United Methodist Insurance a royalty for the use of its intellectual property.