Property & Casualty key terms

A financial stake in the person or property insured such that the insured suffers real economic loss if a loss occurs. It must exist when property insurance is written and supports indemnity.

The idea that insurance should restore an insured to roughly the same financial position held before a loss, no better and no worse. It prevents profiting from loss and drives valuation methods.

A mutual duty requiring the applicant and the insurer to deal honestly and disclose material facts. Dishonesty by an applicant can let the insurer rescind the contract.

The insurer's right, after paying a claim, to pursue the responsible third party for reimbursement and to share in any recovery. It supports indemnity by preventing double collection.

An agreement in which the amounts exchanged by the parties are unequal and depend on chance. The insured pays a modest premium while the insurer may pay a large, uncertain loss.

A policy drafted by the insurer with little or no input from the insured, who must accept or reject it as written. Ambiguities are generally construed against the drafter.

The voluntary, intentional giving up of a known right under the policy. Once an insurer waives a right, it generally cannot later enforce that right against the insured.

A statement or condition in the policy that the insured promises is true. Breach of a material warranty can defeat coverage, though modern statutes often require materiality and causation.

The amount of a covered loss the insured must absorb before the insurer pays. Deductibles reduce small claims and moral hazard and lower the premium charged.

A property condition requiring limits at least equal to a stated percentage of the property's value, or claims are reduced proportionally. It penalizes the insured for underinsurance.

Occurrence forms respond to injury or damage that happens during the policy period whenever claims are filed. Claims-made forms respond to claims first made during the period, subject to retroactive dates.

A provision explaining how two or more policies covering the same loss share payment, often through pro rata, primary and excess, or noncontributory arrangements.

A condition allowing the insured and insurer to each choose a competent appraiser when they disagree on the amount of loss; the appraisers may then select an umpire.

An exclusion barring payment for the extra cost of repairing or rebuilding to current building codes, or for demolishing undamaged parts, unless added back by endorsement.

The traditional property valuation of replacement cost minus depreciation, reflecting what the property was worth at the time of loss. Some policies define it by market value instead.

A valuation paying the cost to repair or rebuild with new materials of like kind and quality, without deducting depreciation. Insurers often require limits near the full value.

A property valuation in which insurer and insured settle on a fixed value before a loss, and that amount is paid without depreciation or a coinsurance penalty.

A provision giving a lender rights to claim payments and to receive notice of cancellation or nonrenewal, protecting the lender's interest in the insured property.

Named peril coverage pays only for causes of loss specifically listed in the policy. Open peril, or special form, coverage pays for all direct physical loss except what is excluded.

A homeowners form insuring the dwelling and other structures on an open peril basis while covering personal property only for named perils. It is the most widely used homeowners form.

Homeowners coverage paying the extra cost of temporary housing and normal living costs when a covered loss makes the residence unfit to occupy during repairs.

The core commercial property form insuring buildings, business personal property, and personal property of others at described premises, subject to limits and coinsurance.

Standard endorsements defining which perils apply to commercial property: basic lists named perils, broad adds more named perils, and special provides open peril coverage subject to exclusions.

Commercial coverage that replaces lost net income and continuing normal operating expenses when a covered loss interrupts the business, usually during a defined period of restoration.

A regulatory statement of which property and risks may be insured as inland marine, including goods in transit, bailee property, and transportation instrumentalities, separating inland marine from other property lines.

A person or business holding property belonging to others for a specific purpose such as repair, storage, or processing, and who may be liable if that property is lost or damaged.

Crime coverage for loss of money, securities, or other property caused by employee dishonesty. It is typically written on a discovery basis with its own limit and deductible.

Failure to use the degree of care a reasonable person would use under similar circumstances. A claim requires duty, breach of that duty, proximate cause, and actual damages.

An unbroken chain of events, without which the injury would not have happened, linking a negligent act to the harm. It determines whether liability attaches to the actor.

A doctrine reducing a claimant's recovery in proportion to their own share of fault. Many jurisdictions bar recovery entirely when the claimant's fault outweighs the defendant's.

Liability imposed without any proof of negligence for certain activities or products considered inherently dangerous. The claimant need only show injury and causation.

Liability assigned to one party for the acts of another, such as an employer being held responsible for an employee's negligence committed within the scope of employment.

Personal auto coverage paying the insured's bodily injury damages caused by an at-fault driver who has no insurance, often extended to hit-and-run and underinsured drivers by endorsement.

Physical damage coverage for the insured vehicle when it overturns or strikes another object or vehicle, paid subject to a deductible up to the vehicle's actual cash value.

A system in which injured persons collect their own medical expenses and lost wages from their own insurer regardless of fault, with tort rights limited to serious injuries.

Coverage for damage to customers' vehicles left in the insured's care for storage, service, or repair, written on either a legal liability or a direct primary basis.

Business auto liability coverage for vehicles the business rents or borrows and for employees' personal autos used in company business. It does not insure physical damage to those vehicles.

The principle that workers compensation benefits are an employee's sole recovery from the employer for work-related injury, barring most tort suits in exchange for no-fault benefits.

A number comparing an employer's loss history with the average for its classification, applied to workers compensation premium. Values above 1.00 raise premium; values below reduce it.

Part Two of a workers compensation policy, providing tort liability protection for work-related injury claims that fall outside the statutory benefit system, with separate limits.