AR Property & Casualty key terms

A license issued by the Arkansas Insurance Department that authorizes an insurer to transact specified lines of insurance business in Arkansas; without it, the insurer is nonadmitted.

An insurer holding a certificate of authority to do business in Arkansas. It is regulated by the state, must file rates and forms, and its policyholders are protected by the state guaranty association.

A nonadmitted insurer that may write Arkansas risks only through a licensed surplus lines producer when admitted insurers decline the risk. Its policyholders are not protected by the state guaranty association.

The written authorization an insurer files with the Arkansas Insurance Department so a licensed producer may solicit, negotiate, or sell insurance on that insurer's behalf.

A producer's obligation to hold premiums and returned commissions in a segregated trust account, account for them accurately, and never commingle them with personal or business funds.

Offering or giving any inducement not stated in the policy, such as cash, gifts, or paying part of a premium, to persuade a buyer to purchase insurance; prohibited as an unfair trade practice in Arkansas.

Misrepresenting or omitting material facts about a policy to induce a policyholder to lapse, surrender, or replace existing coverage; classified as an unfair trade practice under Arkansas law.

Prohibited claim-handling conduct, such as misrepresenting policy terms, failing to investigate promptly, or offering far less than a claim is worth, when done knowingly or so often that it is a general business practice.

A statutory entity that pays covered claims of policyholders of insolvent admitted Arkansas insurers, up to statutory limits, funded by assessments on member insurers.

A financial stake in the person or property insured such that the insured suffers genuine economic loss if a loss occurs; required at policy inception and, for property, at the time of loss.

The principle that insurance should restore the insured to roughly the same financial position held before a loss, no better and no worse, preventing profit from insurance.

An insurance contract drafted by the insurer and offered on a take-it-or-leave-it basis, so ambiguous wording is generally interpreted in favor of the insured.

A contract in which the amounts exchanged are unequal and depend on chance; the insured may pay a small premium and collect a large benefit, or collect nothing.

The mutual duty of insurer and applicant to deal honestly and disclose all material facts; a breach by the applicant may allow the insurer to rescind or deny coverage.

Waiver is the voluntary giving up of a known right under the policy; estoppel prevents the insurer from later asserting that right if the insured reasonably relied on the waiver.

The insurer's right, after paying a loss, to pursue the responsible third party and recover those payments, helping hold down premiums and preventing the insured from collecting twice.

Failure to use the degree of care a reasonable person would use in similar circumstances; the legal basis for most liability claims, requiring duty, breach, causation, and damages.

An accident, including continuous or repeated exposure to substantially the same harmful conditions, that results in bodily injury or property damage during the policy period.

A condition that increases the likelihood or size of a loss, such as icy steps (physical), dishonesty (moral), or carelessness (morale).

The cost to repair or replace damaged property with new property of like kind and quality, minus depreciation; the standard valuation method for many property policies.

The cost to repair or replace damaged property with new property of similar kind and quality without deducting depreciation, usually capped by the policy limit and paid after repairs are made.

A property policy condition requiring the insured to carry insurance equal to a stated percentage of the property's value; otherwise claims are reduced proportionately.

The amount of each loss the insured must absorb before the insurer pays, which reduces small claims and lowers the premium.

A property form for dwellings, contents, and fair rental value that does not include personal liability coverage; used for rental dwellings, secondary homes, or risks ineligible for homeowners coverage.

A package policy for owner-occupied dwellings that combines dwelling and personal property coverage with personal liability and medical payments coverage, typically written on an HO-3 or HO-5 form.

Coverage that pays the extra cost to rebuild or repair damaged property in compliance with current building codes or zoning laws, costs a standard policy excludes.

Coverage that replaces net income and continuing normal expenses, such as rent or utilities, while a business is shut down by a covered loss during the period of restoration.

A policy provision protecting a lender's interest in mortgaged property; the insurer pays the mortgagee to the extent of its interest and notifies it of cancellation or nonrenewal.

A liability policy covering bodily injury and property damage arising from an insured's premises, operations, products, and completed work, plus personal and advertising injury.

A liability policy that responds to claims first made against the insured during the policy period, subject to a retroactive date; later-reported claims may be covered by an extended reporting period.

A policy for personal automobiles covering liability, medical payments, uninsured motorist, and physical damage, with coverage applying to owned autos and, within limits, to borrowed or rented autos.

Auto liability limits stated as three separate amounts, such as 25/50/25, meaning per-person bodily injury, per-accident bodily injury, and per-accident property damage maximums.

A single auto liability limit that applies to all bodily injury and property damage from one accident, without separate caps for each person or type of damage.

Coverage that pays the insured, or passengers, for bodily injury caused by a driver who has no liability insurance or whose limits are too low to cover the loss.

Coverage that pays reasonable and necessary medical and funeral expenses for the insured and passengers after an auto accident, regardless of who caused the accident, up to the stated limit.

Coverage required for most Arkansas employers that pays statutory medical and disability benefits to employees injured on the job, without the employee proving employer negligence.

A policy providing liability limits above scheduled underlying policies and, in some cases, filling gaps in coverage, usually after the underlying insurance is exhausted.