Insurance Contracts and Policies
Expert-defined terms from the Specialist Certification in Insurance Law and Professional Liability course at London School of International Business. Free to read, free to share, paired with a globally recognised certification pathway.
Insurance Contracts and Policies Glossary #
Insurance Contracts and Policies Glossary
1 #
Adhesion Contract
An adhesion contract is a type of contract where one party has significantly mor… #
Insurance policies are often considered adhesion contracts because the insured party usually has limited ability to negotiate the terms and conditions.
2 #
Agent
An insurance agent is a licensed professional who sells insurance policies on be… #
Agents may work for a single insurance carrier (captive agent) or represent multiple companies (independent agent).
3 #
Beneficiary
A beneficiary is the person or entity designated to receive the proceeds of an i… #
Beneficiaries can be individuals, organizations, or trusts.
4 #
Binder
A binder is a temporary insurance contract that provides coverage until a formal… #
Binders are often used in situations where immediate coverage is needed, such as when buying a new car.
5 #
Business Interruption Insurance
Business interruption insurance is a type of coverage that compensates a busines… #
This coverage helps businesses stay afloat during the downtime caused by an insured event.
6 #
Claims Adjuster
A claims adjuster is an insurance professional responsible for investigating and… #
Adjusters may work for the insurance company or be independent contractors.
7 #
Coinsurance
Coinsurance is a clause in an insurance policy that requires the policyholder to… #
Failure to meet the coinsurance requirement can result in a penalty or reduced claim payout.
8 #
Deductible
A deductible is the amount of money the policyholder must pay out of pocket befo… #
Deductibles are common in property and casualty insurance policies.
9 #
Exclusion
An exclusion is a provision in an insurance policy that specifies what is not co… #
Exclusions can vary depending on the type of insurance and are important to review to understand the limitations of coverage.
10 #
Floater Policy
A floater policy is an insurance policy that covers movable property, such as je… #
Floater policies provide broader coverage than standard homeowners or renters insurance.
11 #
Grace Period
12 #
Indemnity
Indemnity is the principle in insurance that the insured should be restored to t… #
Insurance policies are designed to indemnify the policyholder, not provide a windfall.
13 #
Jurisdiction Clause
A jurisdiction clause is a provision in an insurance policy that specifies the l… #
This clause helps determine which court will have authority over the case.
14 #
Key Person Insurance
Key person insurance is a type of policy that compensates a business for financi… #
The policy helps the business survive the loss of a key individual.
15 #
Limit of Liability
The limit of liability is the maximum amount that an insurance company will pay… #
Policyholders can choose their limits of liability based on their needs and budget.
16 #
Misrepresentation
Misrepresentation occurs when a policyholder provides false or misleading inform… #
Misrepresentation can void the policy or result in denial of a claim.
17 #
Named Perils
Named perils are specific risks or events that are covered by an insurance polic… #
Policies that cover only named perils are more limited in scope than all-risk policies, which cover any risks not specifically excluded.
18 #
Occurrence Policy
An occurrence policy is an insurance policy that covers claims arising from even… #
Occurrence policies provide long-term coverage for risks that may not be discovered immediately.
19 #
Premium
20 #
Quitclaim
A quitclaim is a document that releases one party's interest in a property or as… #
In insurance, a quitclaim may be used to transfer ownership of a policy from one person to another.
21 #
Reinsurance
Reinsurance is a practice in which insurance companies transfer a portion of the… #
Reinsurance helps primary insurers manage their exposure to large losses.
22 #
Subrogation
Subrogation is the legal right of an insurance company to pursue a claim against… #
Subrogation allows the insurer to recover the amount paid to the policyholder.
23 #
Term Life Insurance
Term life insurance is a type of policy that provides coverage for a specified p… #
If the insured dies during the term, the policy pays out a death benefit to the beneficiary.
24 #
Underwriting
Underwriting is the process by which insurance companies evaluate the risk of in… #
Underwriters assess the likelihood of a claim based on various factors.
25 #
Valued Policy
A valued policy is an insurance policy that pays a predetermined amount in the e… #
Valued policies are often used for unique or irreplaceable items.
26 #
Waiver
A waiver is a voluntary relinquishment of a right or privilege #
In insurance, a waiver may be used to release the insurer from certain obligations or limitations under the policy.
27 #
XOL (Excess of Loss)
XOL, or excess of loss reinsurance, is a type of reinsurance that provides cover… #
XOL reinsurance helps insurers protect against catastrophic losses.
28 #
Yield Curve Risk
Yield curve risk is the risk that changes in the shape or slope of the yield cur… #
Yield curve risk can impact the insurer's profitability and solvency.
29 #
Zero Depreciation
Zero depreciation, also known as bumper #
to-bumper insurance, is a type of coverage that provides full reimbursement for the cost of repairing or replacing damaged parts of a vehicle without factoring in depreciation. Zero depreciation policies are popular for new cars.
30 #
Actuarial Value
Actuarial value is a measure of the financial protection provided by an insuranc… #
Actuarial value helps insurers set premiums and reserves to ensure the financial stability of the company.
31 #
Bad Faith Insurance
Bad faith insurance refers to the intentional or reckless failure of an insuranc… #
Bad faith practices can include denying legitimate claims, delaying payments, or misleading policyholders about coverage.
32 #
Captive Insurance Company
A captive insurance company is a subsidiary established by a parent company to p… #
Captive insurers can customize policies to meet the specific needs of the parent company.
33 #
Declarations Page
The declarations page is the first page of an insurance policy that provides key… #
Policyholders should review the declarations page carefully to ensure accuracy.
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Endorsement
An endorsement is a document attached to an insurance policy that modifies the t… #
Endorsements can add or remove coverage, change limits, or clarify policy language to better meet the policyholder's needs.
35 #
Facultative Reinsurance
Facultative reinsurance is a type of reinsurance in which the reinsurer evaluate… #
Facultative reinsurance is used for high-risk or unique exposures.
36 #
Guaranteed Issue Insurance
Guaranteed issue insurance is a type of policy that is available to applicants w… #
Guaranteed issue policies are typically more expensive than traditional policies but offer coverage to those with preexisting conditions.
37 #
Hard Market
A hard market is a period in the insurance industry characterized by high premiu… #
Hard markets are often driven by an increase in claims, catastrophic events, or changes in regulations.
38 #
Incontestability Clause
An incontestability clause is a provision in an insurance policy that limits the… #
The clause protects policyholders from having their coverage denied due to innocent mistakes or omissions.
39 #
Joint and Several Liability
Joint and several liability is a legal principle that holds multiple parties res… #
In insurance, joint and several liability may apply to multiple policyholders on a shared policy.
40 #
Loss Ratio
The loss ratio is a key performance indicator in the insurance industry that mea… #
A high loss ratio indicates that an insurer is paying out more in claims than it is taking in premiums, which can impact profitability.
41 #
Moral Hazard
Moral hazard is the risk that a policyholder may intentionally cause or exaggera… #
Insurance companies use underwriting practices and risk management strategies to mitigate moral hazard.
42. Non #
Renewal
Non #
renewal is the decision by an insurance company not to extend a policy beyond its expiration date. Non-renewal may be based on changes in risk, claims history, or other factors that make insuring the policyholder unprofitable or too risky.
43. Occurrence #
Based Coverage
Occurrence #
based coverage is a type of insurance policy that covers claims for losses that occur during the policy period, regardless of when the claim is reported. Occurrence-based policies provide long-term protection for potential liabilities that may take years to surface.
44 #
Peril
A peril is a specific risk or cause of loss covered by an insurance policy #
Common perils include fire, theft, windstorm, and liability claims. Insurers assess the likelihood and severity of perils to determine premiums and coverage options.
45 #
Quota Share Reinsurance
46 #
Reinstatement
Reinstatement is the process of restoring an insurance policy that has lapsed du… #
Policyholders may be required to pay past due premiums, fees, and provide evidence of insurability to reinstate coverage.
47 #
Sublimit
A sublimit is a provision in an insurance policy that caps the maximum amount of… #
Sublimits are common in commercial policies to manage risk exposure for high-value assets.
48 #
Term Conversion
Term conversion is the process of converting a term life insurance policy into a… #
Term conversion allows policyholders to maintain coverage after the initial term expires.
49 #
Umbrella Policy
An umbrella policy is a type of liability insurance that provides additional cov… #
Umbrella policies offer broader protection against catastrophic losses and lawsuits.
50 #
Variable Life Insurance
Variable life insurance is a type of permanent life insurance that allows policy… #
The cash value of variable life policies fluctuates based on the performance of the underlying investments.
51 #
Waiting Period
A waiting period is a specified period of time that must pass before coverage ta… #
Waiting periods help insurers manage risk and prevent fraudulent claims.
52 #
Excess and Surplus Lines Insurance
Excess and surplus lines insurance, also known as E&S insurance, provides covera… #
E&S insurers specialize in providing coverage for hard-to-place risks.
53 #
Workers' Compensation Insurance
Workers' compensation insurance is a type of coverage that provides benefits to… #
Workers' comp insurance covers medical expenses, lost wages, and rehabilitation costs for injured workers.
54 #
Loss Adjustment Expense
Loss adjustment expenses, or LAE, are the costs associated with investigating, e… #
LAE includes expenses such as adjuster fees, legal costs, and administrative expenses incurred during the claims process.
55 #
Salvage and Subrogation Recovery
Salvage and subrogation recovery are methods used by insurance companies to reco… #
Salvage involves recovering value from damaged property, while subrogation allows insurers to pursue third parties responsible for a loss.
56 #
Agent of Record
An agent of record is the licensed insurance agent or broker designated by the p… #
The agent of record is responsible for servicing the policy and handling claims on behalf of the insured.
57 #
Average Clause
An average clause is a provision in an insurance policy that reduces the amount… #
The average clause helps discourage policyholders from underestimating the value of their assets.
58 #
Combined Ratio
The combined ratio is a financial metric used by insurance companies to evaluate… #
The combined ratio measures the sum of the loss ratio and expense ratio, with a ratio below 100 indicating profitability.
59 #
Direct Writer
A direct writer is an insurance company that sells policies directly to consumer… #
Direct writers may offer lower premiums and faster service by eliminating the middleman in the insurance sales process.
60 #
Errors and Omissions Insurance
Errors and omissions insurance, also known as E&O insurance, provides coverage f… #
E&O insurance is common for professionals such as attorneys, accountants, and consultants.
61 #
Fiduciary Liability Insurance
Fiduciary liability insurance protects individuals and organizations that serve… #
Fiduciary liability insurance covers legal defense costs and settlements related to fiduciary claims.
62 #
Hold Harmless Clause
A hold harmless clause is a provision in a contract or insurance policy that pro… #
Hold harmless clauses are common in construction contracts and indemnity agreements.
63 #
Insurable Interest
Insurable interest is a legal requirement in insurance that the policyholder mus… #
Insurable interest helps prevent insurance contracts from becoming gambling agreements.
64 #
Liability Insurance
Liability insurance provides coverage for claims alleging bodily injury or prope… #
Liability insurance protects individuals and businesses from financial losses resulting from lawsuits and legal claims.
65 #
Occurrence Policy
An occurrence policy is an insurance policy that covers claims arising from even… #
Occurrence policies provide long-term coverage for risks that may not be discovered immediately.
66 #
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance,… #
Professional liability insurance is common for professionals such as attorneys, accountants, and consultants.
67 #
Reinstatement Clause
A reinstatement clause is a provision in an insurance policy that allows the pol… #
Reinstatement clauses help policyholders maintain continuous coverage.
68 #
Surety Bond
A surety bond is a contract between three parties #
the principal (the party performing the obligation), the obligee (the party receiving the benefit of the bond), and the surety (the party providing the financial guarantee). Surety bonds ensure that the principal fulfills their obligations to the obligee.
69 #
Underinsured Motorist Coverage
Underinsured motorist coverage is a type of auto insurance that provides coverag… #
Underinsured motorist coverage helps protect policyholders from financial losses in accidents with underinsured drivers.
70 #
Waiver of Subrogation
A waiver of subrogation is a provision in an insurance policy that prevents the… #
Waivers of subrogation are common in contracts to protect contractors, landlords, and other parties from liability claims.
71 #
Accelerated Death Benefit
An accelerated death benefit is a provision in a life insurance policy that allo… #
Accelerated death benefits help policyholders cover medical expenses and other costs while alive.
72 #
Binder Letter
A binder letter is a temporary insurance contract that provides coverage until a… #
Binder letters are often used in situations where immediate coverage is needed, such as when buying a new car or home.
73 #
Certificate of Insurance
A certificate of insurance is a document issued by an insurance company that pro… #
A certificate of insurance is a document issued by an insurance company that provides