MT Property & Casualty key terms

An insurance company authorized by a state insurance department to transact business in that state, subject to its rate filing, financial solvency, and market conduct rules.

A nonadmitted insurer that may write coverage in a state only when admitted insurers cannot or will not provide it, usually through a specially licensed surplus lines broker. Policyholders generally lack guaranty fund protection.

A license issued by a state insurance department granting an insurer legal permission to conduct insurance business in that state. Without it, the insurer is nonadmitted and generally cannot be marketed to residents.

Offering or giving anything of value, such as cash, gifts, or reduced premiums, to a buyer as an inducement to purchase insurance when it is not specified in the policy. Illegal in most states as an unfair trade practice.

Inducing a policyholder to lapse, surrender, or replace an existing policy through misleading or incomplete comparisons of benefits, so the replacement appears better than it is. Treated as an unfair trade practice.

The legal obligation of a producer or insurer to hold money belonging to clients or insurers in trust, keep it separate from personal funds, and account for it promptly. Misuse can bring license suspension or criminal charges.

A state-created entity funded by licensed insurers that pays covered claims of policyholders when an admitted insurer becomes insolvent. It does not cover nonadmitted insurers and applies claim limits.

The formal notification an insurer files with the state insurance department authorizing a licensed producer to act as its agent. A producer generally must be appointed before soliciting business for that insurer.

A financial stake in the person or property insured such that the insured would suffer a genuine economic loss from a covered event. For property coverage it must exist at policy inception.

The concept that an insured should be restored to roughly the same financial position held before a loss, no better and no worse. It explains why property claim payments are capped at the actual amount of loss.

The mutual expectation that insurer and insured will deal honestly and disclose all material facts. A breach by either party may allow the other to void the contract.

An insurance policy drafted by the insurer and offered to the applicant on a take-it-or-leave-it basis. Because the insured has no bargaining power over wording, ambiguities are generally read in the insured's favor.

A contract in which the values exchanged by the parties are unequal and depend on chance, so a small premium may fund a large claim or no claim may ever be paid.

The specific cause of a loss, such as fire, windstorm, theft, or collision. Policies list covered perils and exclude others, while a hazard increases the chance that a peril will occur.

A condition that increases the likelihood or severity of a loss from a covered peril, such as oily rags in a workshop, icy steps, or a poorly maintained roof.

The dominant, uninterrupted cause that sets a chain of events in motion leading to a loss. It determines coverage when several causes combine in a single claim.

The insurer's right, after paying a covered loss, to pursue the responsible third party to recover what it paid. It supports indemnity by preventing the insured from collecting twice for the same loss.

Waiver is voluntarily giving up a known right under the policy; estoppel prevents a party from later asserting a right it surrendered when the other party reasonably relied on that action.

A property valuation method that pays replacement cost minus depreciation, reflecting the used value of the damaged property at the time of loss. It is the default method in many older property forms.

A valuation method that pays the cost to repair or replace damaged property with new property of similar kind and quality, without deducting for depreciation. Payment is usually limited to the policy limit.

A property provision requiring the insured to carry coverage equal to a stated percentage of the property's value. If the insured carries less, each claim payment is reduced proportionally.

Property coverage that pays additional living expenses or lost fair rental income when a covered loss makes the insured dwelling or premises uninhabitable or unusable for a period of time.

A policy provision naming a lender and protecting its interest in the insured property, so the lender receives loss payments up to the amount owed, even if the borrower's own acts would otherwise void coverage.

A condition in which a building holds no occupants and no personal property inside. It sharply raises loss potential, so most property forms restrict or exclude coverage after a stated period.

Commercial property coverage that replaces lost net income and continuing normal operating expenses when a covered loss suspends operations, for the time reasonably needed to restore the business.

Property coverage written for a building under construction or renovation, insuring the structure, materials, and supplies against loss until the project is completed and accepted by the owner.

Property coverage that applies one limit of insurance to multiple items, multiple locations, or both, rather than a separate specific limit for each item or building.

A property endorsement that pays extra costs required by building codes after a loss, such as demolishing undamaged portions or upgrading construction to meet current standards during rebuilding.

A liability policy insuring a business for bodily injury, property damage, personal and advertising injury, and medical payments arising from premises, operations, and products, subject to its limits and exclusions.

Liability coverage for bodily injury or property damage occurring away from the insured's premises and arising from products sold or work completed after the insured has relinquished control of it.

Liability coverage for specified non-bodily offenses such as libel, slander, wrongful eviction, and infringement of advertising ideas, as those offenses are defined in the policy.

Coverage that pays reasonable medical expenses for bodily injury to others on the insured's premises or arising from its operations, regardless of fault and usually without requiring a lawsuit.

Excess liability coverage that pays after underlying auto and general liability limits are used up, and that may also drop down to cover certain gaps in the underlying coverage.

Coverage required by state law that pays statutory benefits, including medical care, lost wages, and disability, to employees injured or made ill by their work, without regard to fault.

The principle that workers compensation benefits are an injured employee's sole remedy against the employer for a work-related injury, given that benefits are paid without proof of fault.

Auto liability limits expressed as three numbers: maximum per person for bodily injury, maximum per accident for bodily injury, and maximum per accident for property damage, such as 100/300/50.

Coverage that pays an insured's damages caused by a driver who carries no liability insurance, or in some states by a hit-and-run driver, up to the stated limits.

The maximum amount an insurer will pay for all covered claims during a single policy period, which applies on top of any per-occurrence limit stated in the policy.