Personal Lines key terms

An insurance company authorized by a state insurance department to transact business in that state. It must meet capital, solvency, and market-conduct requirements and is backed by the state guaranty fund.

The license a state issues to an insurer, agent, broker, or adjuster permitting it to conduct insurance business there. Operating without one is an unauthorized-insurance violation.

The credential an individual or agency must hold to solicit, negotiate, or sell insurance in a state. It requires prelicensing education, an exam, a background check, and continuing education to renew.

A nonadmitted carrier allowed to write risks that admitted insurers decline or cannot cover. It is not protected by the guaranty fund, and placement usually requires a diligent-search effort by a licensed surplus lines broker.

A producer's legal obligation to hold premiums and client funds in trust, account for them accurately, and act in the client's interest rather than for personal gain.

Inducing a policyholder to lapse, surrender, or replace coverage through misleading or incomplete comparisons. It is an unfair trade practice subject to state penalties and license action.

A financial stake in the person or property insured such that a loss would cause genuine economic harm. It must exist at policy inception for property coverage and generally at the time of loss for life coverage.

The idea that insurance should restore the insured to roughly the same financial position held before a loss, not create profit. It underlies actual cash value and replacement-cost loss settlement.

The mutual duty of applicant and insurer to deal honestly and disclose material facts. Breach by the applicant can allow the insurer to rescind a policy.

A false statement on an application that would have changed the insurer's decision to issue coverage or set the premium. It may permit rescission or denial of a claim.

Intentional silence about a fact the insurer needed to evaluate the risk, such as a prior loss history or a dangerous dog. It is treated like a material misrepresentation.

A statement or condition in the policy that the insured promises is true. A material breach can void coverage, though modern property policies generally treat these as conditions rather than absolute promises.

The voluntary relinquishment of a known right under the policy, such as an insurer paying a late claim notice without objection. Once waived, the right may not be reclaimed.

A legal bar that prevents a party from asserting a right after its earlier conduct led the other party to rely on that conduct to their detriment.

Authority a producer appears to have based on the insurer's conduct, even without express permission. The insurer may be bound by acts a reasonable client believed were authorized.

The part of the policy showing named insureds, address, policy period, limits, deductibles, forms attached, and premium. It is the first place to check when evaluating a claim.

The section that states the core promise to pay for covered perils or occurrences, subject to limits, exclusions, and conditions elsewhere in the policy.

A policy provision that removes specified perils, property, or persons from coverage. The burden of proving an exclusion applies generally rests with the insurer.

Policy provisions that set out duties and rules both parties must follow, such as notice of loss, proof of loss, appraisal, and suit-limitation periods.

A written amendment attached to a policy that changes, adds, or removes coverage. It overrides conflicting original policy language and is part of the contract.

The homeowners coverage that insures the dwelling structure and attached structures on the residence premises, typically on a replacement-cost basis for the full policy limit.

Homeowners coverage for detached structures such as garages, sheds, and fences on the residence premises. It is usually a stated percentage of Coverage A and excludes structures used for business.

Homeowners coverage for the insured's household contents and personal belongings, both at the residence and, within limits, away from it. Special sublimits apply to categories like jewelry and cash.

Pays additional living expenses when a covered loss makes the residence uninhabitable, and covers fair rental value lost while repairs are made.

Loss settlement that pays what it costs today to repair or replace damaged property with new material of like kind and quality, without deducting depreciation.

Loss settlement equal to replacement cost minus depreciation, reflecting the used value of the damaged property at the time of loss.

Homeowners coverage that pays sums the insured becomes legally obligated to pay because of bodily injury or property damage caused by an occurrence, plus defense costs.

Pays reasonable medical expenses for non-residents injured on the insured location or by the insured's activities, regardless of fault, subject to a small limit.

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.

Injury other than bodily injury, such as libel, slander, invasion of privacy, false arrest, or wrongful eviction. It is covered under liability sections only when the definition is expressly included.

The most common homeowners form, covering the dwelling on an open-peril (risk of direct physical loss) basis and personal property on a named-peril basis.

A homeowners form that insures both the dwelling and personal property on an open-peril basis, subject to exclusions. It offers broader coverage than the HO-3.

A cause of loss specifically listed in the policy, such as fire, lightning, windstorm, hail, or theft. Damage must result from a listed peril to be covered.

Property forms for dwellings that are not owner-occupied or do not qualify for homeowners coverage, such as rental houses. They insure the structure and offer optional personal property and liability coverage.

The income a rented dwelling would have generated while unusable because of a covered loss. It is paid under loss-of-use coverage, net of expenses that continue regardless of the loss.

A floater or endorsement listing specific items such as jewelry or cameras at agreed values, usually with broader perils and no deductible. It supplements the limited Coverage C sublimits.

An inland marine policy that insures scheduled valuables against open-peril loss, often worldwide and without a deductible, at stated or agreed values.

Coverage for property in transit or at temporary locations, such as baggage, instruments, or shipped goods. It fills gaps left by property policies tied to a fixed residence.

The standard family auto form covering liability, medical payments, uninsured motorists, and physical damage for personal vehicles. It defines insureds broadly to include resident relatives.

Liability limits stated as three numbers, such as 100/300/50, meaning per-person bodily injury, per-accident bodily injury, and property damage respectively.

A single dollar amount that caps total liability payments for all bodily injury and property damage from one accident, without separate per-person or per-category caps.

Pays reasonable medical and funeral expenses for the insured and passengers injured in an auto accident, regardless of fault, up to the stated limit.

Pays the insured's damages when injured by a driver with no liability insurance, and underinsured motorist coverage responds when the at-fault driver's limits are too low.

Physical damage coverage for loss to the insured auto caused by impact with another vehicle or object, or by overturn, subject to the deductible.

Physical damage coverage for losses such as theft, fire, vandalism, glass breakage, hail, and animal strikes, usually with a separate deductible.

The amount of each loss the insured pays before the insurer responds. Higher deductibles lower premium but increase the insured's retained share.

Excess liability coverage that sits above homeowners and auto liability limits and may also drop down to fill gaps, generally requiring underlying limits of specified amounts.

The amount the insured must pay before an umbrella or excess policy responds when no underlying coverage applies to the loss. It differs from a deductible in that it may include defense costs.

A federal program that makes flood coverage available through participating communities and write-your-own insurers. Standard homeowners policies exclude flood, so separate coverage is required.

A state-created residual market that offers basic property insurance to owners who cannot obtain coverage in the voluntary market, often in urban or high-risk areas.

Coverage for boats and personal watercraft, typically written as an endorsement to homeowners for small craft or as a separate boatowners policy for larger vessels. Homeowners liability extends to some recreational craft.

A sworn statement the insured submits detailing the amount and cause of loss. Failure to file it within the required period can jeopardize the claim.

A dispute-resolution method in which each party selects a competent appraiser and the two choose an umpire to set the loss amount when they disagree. It does not decide coverage.

The insurer's right, after paying a claim, to pursue the responsible third party to recover the amount paid. The insured must not impair that right.

A provision that determines how payment is shared when more than one policy covers the same loss, often by pro rata shares or by making the policy excess.

Replacing an existing life or property policy with a new one. Many states require disclosure notices and a comparison so the client understands any loss of benefits or new surrender charges.