AAI key terms

A property valuation method that pays the cost to repair or replace damaged property minus depreciation for age and condition. Because the deduction reduces the payout, the insured shares the cost of replacing older items.

A valuation method that pays whatever it costs to repair or replace damaged property with new property of similar kind and quality, with no deduction for depreciation, up to the policy limit.

A property policy condition requiring the insured to carry a limit equal to a stated percentage of the property's value. If the limit falls short of that target, partial losses are reduced proportionally.

The most widely used homeowners form. It insures the dwelling and other structures against risks of direct physical loss unless excluded, while personal property is covered only for listed perils; liability and medical payments are included.

Homeowners coverage that pays the extra cost of temporary housing, meals, and similar costs when a covered loss makes the residence uninhabitable, usually for a stated time period.

An endorsement that lists specific valuables, such as jewelry, furs, or art, and insures them for broader perils and higher limits than the base policy gives, often with no deductible.

A policy that adds liability protection above the limits of a homeowners or auto policy and may also cover exposures those policies exclude, after the required underlying insurance is used up.

The standard contract for insuring a private passenger car. It combines liability, medical payments, uninsured motorist, and physical damage coverages, each with its own terms, limits, and exclusions.

Auto liability limits written as three figures, such as 100/300/50. They represent the maximum for bodily injury to one person, bodily injury per accident, and property damage per accident.

Auto coverage that pays the insured's bodily injury damages caused by a driver who carries no liability insurance or who flees the scene of a hit-and-run accident.

Auto coverage that pays reasonable medical and funeral expenses for the insured and passengers injured in an accident, regardless of who caused it, up to the stated limit.

A state auto system under which each driver's own insurer pays medical and related losses after an accident, and the right to sue for pain and suffering is restricted unless injuries pass a threshold.

A property policy provision naming a lender as an interested party. It gives the lender rights to loss payments and cancellation notice and protects the lender even when the insured's own actions void coverage.

Failure to use the care a reasonable person would use under similar circumstances. It is the legal foundation for most liability claims paid under personal and commercial policies.

The core business liability form. It covers bodily injury and property damage arising from premises, operations, and products, plus personal and advertising injury, with defense costs normally paid outside the limits.

Liability coverage that responds to injury or damage that takes place during the policy period, regardless of how many years later the claim is actually reported to the insurer.

Liability coverage that responds to claims first reported during the policy period, provided the injury or damage happened on or after the retroactive date shown in the policy.

The maximum a liability policy will pay for all covered claims during a policy period, apart from claims that fall under the separate products-completed operations aggregate.

The liability exposure for bodily injury or property damage caused by a product or completed work after it has left the insured's control, subject to its own separate aggregate limit.

A package policy for small and mid-sized businesses that combines property and general liability coverage, often adding business income, and uses simplified eligibility rules and limits.

Property coverage that pays the net income the business would have earned plus continuing normal operating expenses during the time needed to repair or replace damaged property.

Pays the additional costs a business incurs to keep operating or to reopen quickly after a covered property loss, such as renting temporary space, equipment, or expediting repairs.

Insures loss from the accidental breakdown of covered machinery, boilers, or electrical equipment, including damage to the equipment itself and the business income lost while it is out of service.

A statutory benefit system that pays medical costs, wage replacement, and death benefits to employees injured on the job regardless of fault, in exchange for limits on the employee's right to sue.

A number that compares an employer's past claims with those of similar employers in the same class. A factor below 1.00 reduces workers compensation premium; a factor above 1.00 increases it.

An endorsement that extends liability coverage to another party, such as a landlord or general contractor, for claims connected to the named insured's premises, operations, or work.

An endorsement under which an insurer gives up its right to recover claim payments from another responsible party, a provision frequently required in leases and construction contracts.

A post-term review in which the insurer verifies the insured's actual payroll, sales, or other exposure basis and adjusts the premium to the amount properly owed for the period.

Property coverage on a structure under construction, insuring the building, materials, and supplies while work proceeds, and often extending to materials stored off-site or in transit.

The legal obligation of an agent to act in good faith when handling other people's money and coverage placements, including prompt remittance of premiums and never misusing client or insurer funds.

A separate bank account in which an agency holds client premiums and funds owed to insurers, keeping that money apart from the agency's own operating funds.

Professional liability coverage for insurance producers that pays damages and defense costs when a client claims a negligent act, error, or omission in placing, advising on, or servicing coverage.

The power an insurer grants a producer to commit the insurer to a risk immediately, without prior approval, usually limited by written underwriting guidelines and specified classes of business.

An extra payment from an insurer to an agency based on the volume and profitability of business the agency placed with that insurer, typically calculated after the year closes.

The practice of raising a client's coverage limits to a round figure when the added premium is small, which improves protection and slightly increases agency commission.

A scheduling feature in an agency management system that alerts staff when follow-up work, such as renewals, endorsements, audits, or claim reviews, is due on an account.

Incurred losses divided by earned premium, shown as a percentage. Insurers and agencies use it to judge whether a book of business or a single account is profitable to keep.

The entire collection of policies and accounts an agency or producer services, commonly measured by premium volume, commission income, account count, and retention rate.

A short summary document showing the coverage in force on a policy, usually given to a third party such as a landlord or client as evidence that insurance exists.