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This glossary contains common terms used throughout our website and provides definite and explanations for you.



Verification of books or accounts to determine their accuracy. Certain policies are written on a reporting or adjustable form give the insurer the privilege of auditing the policyholder’s records to verify the accuracy of the premiums paid.
Annual Deductible
The total amount an insured is responsible to retain for the sum of all losses up to a specified deductible during an annual policy period. Once the annual aggregate deductible has been reached by the accumulation of payment by the insured, the insurer responds to the remaining claims up to the policy limits.
The maximum amount an insured is able to collect under a single policy regardless of the number of claims, injuries, accidents, or the number of insureds.
Additional Premium
When a policy has been issued subject to rate, subject to audit, subject to inspection, is assessable, or when the policy is endorsed, the additional premium is the extra amount due, over and above the initial premium stated in the Declarations, because of the increased exposures, higher rates, retrospective rate calculations, additional coverage, or premium audit.
Admitted Carrier
A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted insurer.
Advertising Injury
Damages or injury sustained by a claimant in the course of the advertising activities of the insured which included such injury as libel, slander, violation of the right to privacy, misappropriation of advertising ideas, or the infringement of copyright.
Additional Insured
A person, other than the named insured, who is protected by the terms of the policy. Usually a specified individual such as a spouse or a member of the insured’s family but sometimes, as in automobile insurance, any person, provided that person is driving the insured vehicle with the insured’s permission.
Automobile Medical Payments Insurance
An optional coverage under an automobile liability policy which pays the medical expenses of the policyholder and any of the passengers injured by the insured automobile, irrespective of who was responsible for the accident. This was originally called “basic medical payments.” In addition, it pays the medical expenses of the policyholder and members of the immediate family injured while passengers in any other automobile or when struck by an automobile. In some no-fault states, medical payments insurance has been replaced by personal injury protection (PIP); in other states, it may supplement no-fault insurance.


Basic Limits
Certain minimum amounts of liability in liability insurance (determined by custom or laws), for which “basic” premiums apply. Additional amounts of liability insurance are charged for by the addition of certain percentages of the premium charged for the minimum limits.
An oral or written agreement to provide insurance which serves as evidence of coverage prior to the issuance of a policy. It is often considered to be a temporary insurance policy to provide coverage until a permanent policy has been issued
Binding Authority
When one party (usually an agent) has been given the right and commensurate authority to represent another party (usually an insurer), in effecting or creating an insurance contract.
Blanket Coverage
In property insurance, a single limit of insurance that covers a number of items, such as one amount of insurance to cover two buildings or a single building and its contents. A blanket policy usually contains certain restrictions, which may be absent in “specific” or “itemized” policies, such as the use of a 90% coinsurance clause.
In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).
Bodily Injury Liability Insurance
A form of “third-party” protection covering the insured’s legal liability for bodily injury to others caused by the insured’s negligence.
BOP-Business Owners Policy
Similar to the commercial package policy (CPP), it provides broad property and liability protection in a single contract and is designed for small and medium-sized mercantile, service, office, or apartment risks.
BOR – Broker of Record
A licensed broker who has been designated by the policyholder to represent that policyholder.
Business Interruption Insurance
A time element coverage which pays for loss of earnings when business operations are curtailed or suspended due to property loss as a result of an insured cause of loss. This coverage is now obsolete and has been replaced by a more comprehensive and generic business income insurance.


The termination of a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent’s contract.
The insurance company that provides protection for a particular risk.
Certificate of Insurance
Short-Form documentation of an insurance policy.
CGL–commercial general liability policy
The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.
The formal request by a policyholder or a claimant for payment of a loss under an insurance policy.
The final amount made in payment of a covered loss.
A liability insurance method covering losses from claims asserted against the insured during the policy period, regardless of whether the liability imposing causes occurred during or prior to the policy period. (However, many underwriters may not cover liability imposing causes occurring prior to the policy period.) The coverage trigger is based on the retroactive date stated in the Declarations

The provision in insurance coverages in which the insured and the insurer agree to share in the covered losses in the proportion specified in policy terms and conditions.

In property insurance, the policyholder must carry an amount of insurance that is at least equal to a set percentage of the value of the property in order to receive full payment of a loss.
In health insurance, it is the portion, normally based either on a flat dollar amount or a percentage, of each claim not covered by the insurer. Coinsurance normally applies to the amount in excess of any deductible.

Commercial Property Policy
An “all-risk,” worldwide policy covering business property.
Construction Bond
A surety bond designed to protect the owner of a property on which a building or structure is being built should the contractor not complete the job. If the contractor fails to fulfill the construction contract, the insurer must then make sure the work is finished.
Contractors’ Equipment
Equipment used by contractors in their business operations. Examples may be anything from concrete forms, asphalt plants, bulldozers, cherrypickers, and scaffolding, to small hand tools. This equipment is most often protected by inland marine insurance coverages due to its mobile nature.
Contractors’ Equipment Floater
An inland marine from which insures the equipment, tools, and materials of a contractor.
Contractors Protective Liability
A policy which provides liability coverage for the insured for the negligent acts of contractors and subcontractors hired by the insured. May also cover for their own negligent supervision of the work performed.
A flat, pre-set fee paid by an insured for office visits, drugs, and other medical services as a member of an HMO or preferred provider service. These co-payments are normally a small fraction of the overall cost and act much like a service charge or handling fee.


Debris Removal Clause
A property insurance provision which provides coverage for the cost of clean-up and debris removal after a covered cause of loss has occurred, such as clean up after a fire or windstorm.
Declaration Page
With respect to property and liability insurance, the portion of the insurance policy itself used to detail the name and address of the insured, the locations covered, the policy period, limits of insurance, endorsements attached and premiums for coverage. Commercial policies also contain such items as the type of entity and type of operation of the insured.
A statement made to the company or to its agents by a policyholder, upon which the company may rely on undertaking the insurance.
In a policy providing a deductible clause, the amount which must first be subtracted from the total damage incurred before determining the insurance company’s liability. Of several types used, the straight deductible establishes the insurer’s liability above the deductible but not below it; the franchise deductible establishes the insurer’s liability for the entire amount of damage once the deductible amount is exceeded in a loss; and the disappearing deductible establishes the insurer’s liability for an increasing proportion of the loss, as the total damage rises above the deductible, until the deductible finally “disappears.” Then the insurer is liable for the entire amount. The deductible may be in the form of an amount of dollars, a percent of the loss, a percent of the value of the insured property, or a period of time, as in health insurance.
Direct Billing
A system for the collection of premiums where the insurance company sends a notice to the insured for the premium in lieu of the conventional collection of premiums by the agent. The company sends a statement to the agent, usually monthly recording the premiums collected direct, and credits the agent with commission due on those items.


Earned Premium
The portion of the policy premium allocated to the expired or used portion of the policy term. This also includes any short-rate charge made on policy cancellation.
Employers Liability Insurance
Coverage against the common law liability of an employer for injuries sustained by employees, as distinguished from liability imposed by a workers compensation law.
Employment Practices Liability Insurance (EPLI)
The impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas. Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, resulted in increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination, and discrimination including legal liability for such acts. The coverage is known by various titles. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically the same coverage. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.
A document with language attached to and becoming part of a basic policy for the purpose of modifying the policy, either at inception or mid-term. The term endorsement is usually associated with property and casualty policies while the term rider is normally used with life, accident and health contracts.
Errors and Omissions Insurance
A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others.
A form of coverage for financial institutions protecting against loss to lending institutions which fail to effect insurance coverage.
Excess Liability Insurance
Liability insurance designed to provide an extra layer of coverage above the primary layer. The excess insurance does not respond, however, until the limits of liability in the primary layer have been exhausted. Because of the method of response, it is often much less costly than the primary layer, per $1,000,000 of coverage. The excess layer provides not only higher limits but catastrophic protection for very large losses.
Experience Rating
A form of individual risk rating which takes into consideration the loss experience of the particular risk as a credit or a debit to the manual rate for the insured’s classification. As the size and number of exposure units increase (e.g., a multiple location risk), more credibility is given to the insured’s own experience.
Synonymous with risk: chance of loss by fire, radiation, accident, etc.
The danger of loss (particularly by fire) arising from what happens to another risk close by.
The sum total of values which, if damaged or destroyed, would cause loss under a policy, i.e., the value of everything a policy insures.
A measure of the rating units or premium basis of risk, e.g., payroll or number of automobiles.
A unit of loss potential (e.g., a life, a house, an automobile, a ship, a package in shipment, an acre of growing crops, a plate glass window, a fur coat), in which case the term “exposure unit” is used.
Extra Expense Insurance
Reimbursement for additional expenses incurred because of an insured loss. Written either as a separate policy or as an endorsement.


Fire Insurance
Covers losses caused by fire, lightning, and removal of the insured property from the premises to avoid further loss. All resultant damage such as that done by water and smoke is also covered. Usually supplemented by extended coverage. Currently, this insurance is referred to as property insurance.
A type or line of insurance, as opposed to marine, casualty or fidelity bonding. The term fire insurance is now referred to as property insurance when denoting a line of insurance.
Fire Protection Class
A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Fire Protection Class 1 is the best class (a city or town having fewer than 501 points), and Fire Protection Class 10 is the worst (more than 4,500 points). Also known as Town Class or Town Grading.
Flat Cancellation
The cancellation of a policy as of the time it attached, with all of the premium refunded to the policyholder.
First Named Insured
The party named first in the Declarations of an insurance policy. The first named insured has become significant in commercial insurance because the terms and conditions of the policy itself detail that many of the duties and obligations to the contract must be performed by, or are the responsibility of, the first named insured versus any or all named insureds. Additionally, the insurer has obligations, such as proper notice of cancellation or nonrenewal and return premium refund, that needs go only to the first named insured.
Flat Cancellation
The cancellation of a policy as of the time it attached, with all of the premium refunded to the policyholder.
Flat Rate
In reinsurance, the rate agreed upon between the reinsurer and ceding company to be charged the insured for the coverage, which is a final rate and not adjusted for loss experience, size of the risk, or any other credits or debits.
A rate set for coverage that remains unchanged throughout the policy period, even if the insured suffers unexpected losses.
A property insurance rate used when no coinsurance applies to the policy.
A policy which covers property at many locations, even worldwide and in the course of transit, i.e., the protection “floats around” with the objects insured.
Full Coverage
The use of this terminology usually refers to coverage that has been written without a deductible. The entire amount of loss is covered, up to the state policy limit.


Gap Coverage
An amount of insurance purchased to satisfy the requirement of an excess carrier with respect to underlying insurance. For example, if an excess insurer requires the insured to carry $500,000 of underlying coverage, but the primary insurer will write only $300,000, $200,000 is purchased to fill the gap. Also known as a buffer layer.
Garage Policy
Protects garage or service station operators, vehicle rental agencies, car washes, auto or vehicle dealers, and trailer or RV dealers for claims alleging bodily injury or property damage caused by the operator’s negligence in business operations and the sale or use of automobiles.
General Agent
An independent agent who represents one or more insurers with the authority to appoint subagents who report their business through the general agent, who receives an overriding commission for services provided. In some territories, a general agent also sells insurance, while functioning in others solely as a manager.
A title used by some insurers for those agents receiving a higher commission rate than other agents (because of a higher volume of business placed with the insurer). Such a general agent normally has no additional authority or responsibility, and the title is used to designate the higher commission rate.
General Aggregate Limit
The sum or total amount that will be paid in any one policy period, regardless of how many claims, losses, suits, or insureds may be involved. Some policies allow the aggregate limit to be reinstated after it has been exhausted, by endorsement and for additional premium.
Governing Classification
In determining rates for compensation insurance, the principal occupation of the insured.
Group Health Insurance
Group insurance programs designed to offer affordable health coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms, and provisions that apply to all members of the group. Individual certificates are usually issued to the members to verify that they are covered.


Health Insurance
A broad term describing protection from loss due to illness or injury, resulting in loss of life, loss of earnings or expenses incurred. Within the broad area of health insurance, there are several major coverages which focus on more specific needs, for example, accident insurance, disability income insurance, hospitalization insurance, and sickness insurance.
HMO–Health Maintenance Organization

An entity with four essential characteristics:

an organized system for providing health care in a geographic area,
delivering an agreed upon set of basic and supplemental health maintenance and treatment services
for which services the HMO is reimbursed through a predetermined and periodic prepayment made by or on behalf of each person or family unit enrolled in the HMO, without regard to the amounts of actual services provided.

Hold Harmless Agreement
A contractual arrangement in which one party agrees to assume certain liability which otherwise would be borne by the other party. For example, an insurer may wish to pay a loss when it is uncertain whether it may be called upon a second time to some other party. The payee may be asked to execute an agreement whereby the company will be reimbursed or held harmless by the payee if such request should happen. Another example is when the principal in a large construction project frequently demands to hold harmless agreements from all subcontractors in respect to claims made against the principal arising out of the subcontractors’ negligence. The principal often stipulates the purchase of a liability policy by the subcontractor to support the hold harmless agreement.
Host Liquor Liability Insurance
A form of liquor liability coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person.


Improvements and Betterments
Additions made to real estate enhancing its value and amounting to more than mere repairs or replacement of waste. When made by a tenant, such additions are normally included in the tenant’s own property insurance.
Incurred Losses
Events which have happened and which will cause claims to be made to insurers.
The total amount shown in an insurer’s operating statement as its obligations for policy claims, whether paid or not, during a given period (usually one year). The composition of incurred losses in such a total is derived by the following formula: losses paid during the year, plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year.
To pay for loss suffered, or to reimburse.
Indirect Loss
A type of loss that does not result from direct damage of a covered cause of loss or peril but is, instead, a consequence of the direct damage loss. To illustrate, if a restaurant burns to the ground from a fire, that is the direct loss; however, the income lost because the restaurant could not operate is the indirect loss.
Inland Marine
The insurance of property (generally on an “all­risk” basis) which is in the course of transportation or is of such a nature that it may easily be transported. Also includes some risks at fixed locations considered “instruments of transportation or communication,” such as bridges, tunnels, neon signs, and street clocks, etc., which were accepted as inland marine by custom.
Originally meant the insurance of goods in transit “inland,” instead of at sea, by underwriters who specialized in ocean marine insurance.
A visual or physical examination of a property to determine whether it is an acceptable risk for insurance.
The person(s) or party(ies) protected by an insurance policy, synonymous with assured. Some property­liability policies distinguish between the named insured and other insureds.
The insurance company or other organization, such as a syndicate, pool or association, providing insurance coverage and services.
Interim Rates
Temporary insurance prices, specified by a state insurance department for an insurer which has no legally effective rates otherwise, as a result of the commissioner’s disapproval of its rates. The commissioner may require that a specified portion of premiums received during such interim period be placed in escrow until new rates become effective.


Key Employee Insurance
Insurance an employer buys on a key person within the organization to protect that employer from the financial impact that could result should that employee become ill, disabled, or die. This insurance may be life, health, or disability. Normally, the employee covered has special skills, training, management, or significant attributes that would cause the organization loss of income should that employee become unavailable and a replacement need to be hired or trained.
Kidnap/Ransom Insurance
Originated as a policy for financial institutions, primarily banks, and tailored to meet the standard kidnap procedure, which is forcing the bank to withdraw the ransom money from its vaults and deliver it to a designated place before the release of the banker or family. The recent rash of kidnappings on an international scale involving a variety of corporations has created a heavy demand for broadened coverage. At this time there is a limited market, a disinclination to write in certain countries, and no standardization in rates. The insurance covers named employees for individual or aggregate amounts, with deductibles requiring the insured to participate in about 10% of any loss. Not an easy class to underwrite. Personal accident coverage for kidnap victims is sometimes available.


Landlords Protective Liability
If an owner of property leases the entire premises to others who assume full control, the chance of being held liable for accidents occurring on the premises is diminished. The owner can insure the liability as “landlords protective liability,” at lesser rates than for the normal owner’s, landlord’s, and tenant’s form of policy. This type of policy is rarely requested or used since the advent of the commercial general liability and the use of additional insured endorsements.
The termination of a policy for nonpayment of premium used commonly in life insurance. If the insurance contract becomes void for other reasons, it is also said to have lapsed.
Lawyers Professional Liability Insurance
Protects an attorney or law firm against claims for negligent acts, errors or omissions in the performance of professional legal services.
Legal Liability
Liability imposed by law, as opposed to liability arising from an agreement or contract.
Liquor Liability Insurance
Coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person.
Liquor License Bond
Any bond required by federal, state or municipal authorities to comply with regulations for the handling and sale of liquor.
A group, acting as individuals, to share in making contracts of insurance.
Loss Experience
The loss history for an account, a line of business, a book of business, or some other defining category. Loss experience may include the date of loss, type of loss, amount of loss, whether the loss is open or closed, and a summary of the details of the loss.


Medical Malpractice
Improper actions or failure to exercise proper skill by a professional or others involved with the care of the human body, such as a physician, dentist, blood bank, etc. Malpractice insurance is a form of liability coverage against such mistakes.
Medical Payments Insurance
Protection to pay the cost of medical care to an injured party regardless of whether the policyholder is liable. Written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.
A claims-made liability policy endorsement or coverage option that may be purchased for an additional premium, that will allow the insured an extended reporting period to make claims to the insurer after the expiration of the policy. Often known by the acronym ERPs, which stands for extended reporting period endorsements. This option often ranges from 60 to 120 days in length
A claims-made policy provision that allows additional time to the insured for the reporting of claims, should the claims-made policy be replaced with an occurrence policy or another claims-made policy with a different retroactive date. Usually, the period of time available is limited; up to 60 days after policy expiration is common. There is often no charge for this coverage, but it must be requested within a given period of time.
Minimum Premium
The lowest flat or earned policy charge for which a policy will be issued or for which coverage will be provided.
Motel-hotel Program
A package policy combining the various coverages applicable to the operation of motels, hotels and similar establishments. Basically, it covers fire, allied lines, liability, burglary, and robbery insurance, and sometimes fidelity insurance for employees.
MVR–Motor Vehicle Report
A record usually kept by an individual state’s bureau of motor vehicles (or similar department). MVRs are frequently used by insurance companies to verify the underwriting and rating information on their current and prospective insureds.
Mysterious Disappearance
The vanishing of insured property in an unexplained manner. Previously there were disputes under theft policies as to whether property mysteriously lost had or had not been stolen. To avoid contention, insurers stated in such policies that mysterious disappearance was presumed to be due to theft. Mere disappearance of property, such as an article dropped from a boat, is not covered, since the disappearance is not mysterious.


Non-admitted Insurer
If an insurer is not licensed to write insurance in a specific state, then the insurer is a non-admitted insurer for that state.
Nursing Home Professional Liability Policy
Protects a nursing home against claims for injury resulting from the negligence of the nursing home staff.


Occurrence Policy
The traditional occurrence liability insurance method provides coverage for losses from liability-imposing causes which occurred during the policy period, regardless of when the claim is asserted. Once the policy period is over in a claims-made form, the approximate extent of the underwriter’s liability is known. With the traditional occurrence liability coverage method, the underwriter may not discover the extent of liability for years to come from losses claimed to have occurred within the policy period.
Officers and Directors Liability Insurance
Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation (and even the officers and directors in some cases) for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.
Ordinance or Law Coverage
A property endorsement which provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire. These ordinance or law damages are normally excluded in standard property coverage forms. The coverages available in this endorsement are the cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.
Other Insurance Clause
Language in many policies which states the method for apportioning the loss between two or more policies covering the same property at the time of loss.


Package Policy
A combination of property-liability coverages of two or more separate policies in one contract with one premium. The development of package policies is a move toward economy and efficiency in giving the policyholder one document instead of several.
Partial Disability Insurance
Insurance coverage for insureds who may suffer a partial disability. Partial disability is defined as the inability caused by a covered accident, injury, or illness to perform one or more of the functions of one’s regular job but which does not, however, limit the person’s ability to perform other forms of employment. Often this insurance is called on to provide rehabilitation benefits and job retraining.
Payment Bond
A bond given by a principal, usually a contractor, to guarantee payment for labor or materials used in the work under a contract.
Performance Bond
In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond.
Permit or License Bond
A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.
Personal Injury
Injury, other than bodily injury, resulting from false arrest, false detention, false imprisonment, malicious prosecution, wrongful eviction, wrongful entry, or the invasion of privacy of premises. It also includes injury caused by oral or written material that slanders a person, goods, products, services, or which violates the right to privacy.
Personal Property
Property other than real property; chattels.
Physicians and Surgeons Professional Liability Insurance
Protects physicians and surgeons against claims for personal injury arising from malpractice, errors or mistakes in rendering professional services. Presently, the most expensive coverage due to high jury awards against the medical profession.
The formal written contract of insurance.
The building or section of a building, insured or containing the insured property. Depending on policy conditions, it may also include an adjacent area.
Premises Liability Insurance
Insurance protection for the liability exposure that develops from the normal ownership, maintenance, and use of premises and from the conduct of the risk’s business operations, not including products or completed operations liability which is treated separately.
The amount of money an insurance company charges to provide coverage.
Primary Insurance
The insurance policy providing the first layer of coverage that will respond first to any loss exceeding the deductible.
Products Liability
The liability which a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.
Product-completed Operations Insurance
Coverage designed to protect against the liability for injury, loss, or damage which a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.
Property and Casualty Insurance
Non-life insurance. Basically, there is a broad insurance distinction between companies writing life and health insurance and those writing the property insurance or “non-life” lines of fire, marine, casualty, and surety. Numerous descriptive titles have been employed to describe this “non-life” area of operation. Although no one definition has yet been firmly established, some use the generic title “property and casualty” insurance, while others use “property and liability” insurance.
Pro-rata Cancellation
Termination of a policy by the insurer, for which the return premium due the policyholder is the full proportion for the unexpired term based upon the calculation of the number of days of coverage provided to the premium charge per day. In other words, the pro rata refund is not a “short-rate” return.
Pure Premium
That part of the premium which is sufficient to pay losses and loss adjustment expenses only, but not other expenses.
The premium developed by dividing losses by exposure, disregarding any loading for commission, taxes, and expenses


Ransom Insurance
Originated as a policy for financial institutions, primarily banks, and tailored to meet the standard kidnap procedure: forcing the bank to withdraw the ransom money from its vaults and deliver it to a designated place before the release of the banker or family. The recent rash of kidnappings on an international scale involving a variety of corporations has created a heavy demand for broadened coverage. At this time there is a limited market, a disinclination to write in certain countries, and no standardization in rates. The insurance covers named employees for individual or aggregate amounts, with deductibles requiring the insured to participate in about 10% of any loss. Not an easy class to underwrite. Personal accident coverage for kidnap victims is sometimes available.
The transaction whereby an insurance company (the reinsurer), for a consideration, agrees to indemnify another insurance company known as the ceding company (the reinsured) against all or part of a loss which the latter may sustain under a policy or policies it has issued.
When referred to as “a reinsurance,” the term means the relationship between reinsured(s) and reinsurer(s).
Usually applying to life, accident, and health insurance policies, a rider is a change or an endorsement to the basic contract that amends a term, clause, coverage, condition or provision. The term “endorsement” is normally associated with property and casualty insurance.
Risk Retention Group
An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state.


Security Bond
A written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include the payment of debts and responsibility for defaults.
Self Insurance
The retention of sufficient exposure units by an entity to permit the operation of the Law of Large Numbers. Self-insurance is a term often mistakenly used to describe the situation when an entity decides to retain its own risks. The mistake arises when the exposure units are too few in number to permit the application of the Law of Large Numbers. When the exposure units are too few, a better and less misleading term of such a practice is “self-assumption of risk.”
As it applies to the insurance industry, solvency is whether or not an insurer has the funds to pay insured claims. State insurance departments are directly responsible for assuring the solvency of the insurers licensed to write business in their state and are charged with periodic review and evaluation of those insurers. The minimum reserve, surplus and capital requirements mandated in each jurisdiction for insurers will vary by state.
Storekeepers Liability Policy
A package policy designed for retail store operators, insuring against claims for bodily injury and property damage arising from their business operations. Excludes automobile liability. This policy is now basically obsolete and rarely used, replaced by current versions of the business owners policy.
Subcontract Bond
A bond often required by the general contractor of a subcontractor, that guarantees to the general that the subcontractor will fully perform the subcontract in accordance with the terms. It also specified that the subcontractor will pay for certain labor and material incurred during the process of the subcontracted work.
Subdivision Bond
A bond required of a subdivision guaranteeing to construct or finance improvements such as streets, sidewalks, curbs, gutters, sewers, and drainage.
Sunset Clause
A clause in a casualty excess of loss reinsurance cover that provides that the reinsurer will respond only to losses reported before some predetermined future date (sunset). The clause is used to limit the reinsurer’s exposure to the “long-tail” of liability exposure, particularly in the U.S.
Sunset Provision
Language in a licensing statute or regulation stating that the licensing authority granted is for a specified period of time, and not until revoked, as is customary.
Surety Bond
A written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include the payment of debts and responsibility for defaults.
Surgeons Professional Liability Insurance
Protects physicians and surgeons against claims for personal injury arising from malpractice, errors or mistakes in rendering professional services. At this time a most expensive coverage due to high jury awards against the medical profession.
Surplus Lines Insurance
Insurance written by insurers not licensed in the states where the risks are located and placed with such insurers under the surplus line laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence reported before some predetermined future date (“sunset”).
Surplus Lines Tax
The tax levied on a surplus lines placement, payable by the licensed surplus lines producer placing the risk under the law of a particular state, and charged to the insured. Not to be confused with the direct placement tax, which is applicable in approximately half the states in taxing the insured directly for placement of insurance with a non-admitted insurer where no surplus lines tax is paid.


Tax Preparers Errors and Omissions
A professional liability or errors and omissions insurance coverage designed specifically to meet the needs of accountants, bookkeepers, and similar professionals involved in the preparation of tax returns for other parties. Designed to cover negligence, errors, and omissions that may occur during the rendering or failing to render of those services. One feature frequently found in this type of policy is that both the tax preparation service and the individual tax preparers may be covered in one policy.
Temporary Worker
A person furnished to an employer to substitute for a permanent employee on leave or to meet a seasonal or short-term workload condition. This does not include leased workers.
Third-party Insurance
Protection against liability to a third party. The first two parties are the insured and the insurer.
Transfer of Risk
When the hazards of, exposures, or financial responsibility for loss is transferred or shifted from the risk to another entity. Various types of risk transfer or risk management methods are available and may include insurance policies, hold harmless and other contractual agreements, leasing mechanisms, or other alternative financings.
Travel Agents Errors and Omissions Insurance
Specially designed professional liability or errors and omissions insurance to protect travel agent from losses caused by negligent acts, rendering or failing to render services, and errors and omissions of not only the named insured errors, but often, employees, tour guides, and tour operators contracted by the insured.
Truckers Liability
Auto liability exposures experienced by owners and operators of businesses designed to transport the goods of others by land motor vehicles for a fee. Subject to regulations by the Department of Transportation (DOT). The Insurance Services Office (ISO) has designed a special business automobile insurance for this purpose, called the truckers liability coverage form. Also available is the motor truck carriers liability coverage form.


Umbrella Liability Insurance
A form of liability insurance protecting policyholders for claims in excess of the limits of their primary automobile, general liability and workers compensation policies, and for some (few) claims excluded by their primary policies which are subject to a deductible, which may range from $250 for a personal umbrella to a minimum of $10,000 for a commercial umbrella.
Underinsured Motorists Coverage
Coverage an insured may purchase to protect his or her own self from damage or injury caused by a negligent party who does not have adequate limits of insurance to cover the loss.
Uninsured Motorists Coverage
Under an auto policy, protection for the insured against bodily injury or property damage (in some states) caused by the negligence of an uninsured or underinsured motorist.


Valuation of Loss
The method used to determine or establish the value of an item of real or personal property at the time of loss.
Veterinarian Professional Liability Insurance
Specially designed professional liability insurance to protect veterinarians from claims alleging injury or loss that may result from the rendering or failing to render, errors or mistakes in professional veterinarian services.


Waiver of Subrogation
A condition of an insurance policy which states that the coverage will not be prejudiced if the insured has waived in writing prior to a loss any rights of recovery from a party responsible for the loss.
Workers Compensation Insurance
Protection which provides benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits provided.
One policy, covering all involved interests for big construction projects, i.e., the owner, the contractor, subcontractor, suppliers, etc., providing general liability and workers compensation insurance.

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(800) 307-5160


209 East Bridge Granbury, TX 76048

(817) 617-7048

(800) 307-5160