Property & Casualty Insurance Vocabulary

Vocabulary flashcards generated from the Property and Casualty Final Exam review transcript, covering key policy terms, coverages, definitions, and concepts.

Business Income Coverage

Insurance coverage that protects against lost profits and continuing operating expenses during a business interruption caused by a covered peril.

Excess Liability Policy

A policy that deepens coverage limits for underlying policies without broadening the scope of covered perils or risks.

Section II (Homeowner Policy)

The portion of a homeowner policy that provides personal liability coverage for bodily injury or property damage to third parties and medical payments to others.

Seasonal Inventory Variable

A provision in a Business Owner Policy (BOP) that automatically increases the personal property coverage limit by an additional $25\%$ to accommodate peak seasonal inventory fluctuations.

80% Coinsurance Requirement (Homeowners)

A rule stating that a homeowner must insure a structure to at least $80\%$ of its full replacement value to receive full replacement cost coverage on losses.

Subrogation

A legal process allowing an insurer to recover claim payouts from a responsible third party after indemnifying the insured.

Commercial Liability Insurance

Coverage purchased by businesses to protect against third-party claims involving premises liability, completed operations, and products liability.

Workers Compensation Premiums

Insurance premiums for workers compensation policies that are calculated based on the employer's total payroll.

Strict Liability

A legal doctrine holding manufacturers or sellers liable for damages caused by defective products (such as a lawnmower blade flying off) regardless of fault or negligence.

National Flood Insurance Program (NFIP)

A federal program established to provide flood insurance coverage to property owners at subsidized rates.

Uninsured Motorist Coverage

Auto insurance coverage protecting an insured when injured in an accident caused by a driver who lacks sufficient or legal liability insurance.

Policy Conditions

The section of an insurance contract outlining the mandatory duties, responsibilities, and operational rules for both the insured and the insurer.

Personal Injury Liability

Liability coverage protecting against non-physical injuries, including false arrest, slander, libel, malicious prosecution, and wrongful eviction.

Comprehensive Coverage

Personal auto physical damage coverage protecting against non-collision perils such as flood, earthquake, theft, vandalism, and collisions with animals.

Insurable Interest

A legitimate financial interest in property or person where loss or damage would result in economic hardship, required at the time of loss to collect insurance proceeds.

Theft

Any act of stealing property, which encompasses burglary and robbery but does not require force, threat, or visible marks of forced entry.

Builders Risk Coverage

A specialized commercial property form designed to cover buildings and structures while they are under construction.

Proof of Loss

A formal sworn statement submitted by the insured detailing the time, cause, and extent of financial loss suffered.

Extra Expense Coverage

Business interruption insurance covering additional necessary expenses incurred to maintain operations and prevent shutdown following a covered loss.

Commercial Package Policy (CPP)

A modular policy combining two or more commercial coverages (such as property, general liability, crime, or auto) into a single unified contract.

Insuring Agreements

The core section of an insurance policy that explicitly states the insurer's promise to pay and defines the perils covered.

Boiler and Machinery Policy

Insurance coverage protecting against direct physical loss caused by sudden and accidental breakdown of pressure vessels, boilers, and machinery.

Employee Dishonesty Coverage

Crime insurance protecting an employer against direct financial loss or theft of money and property committed by dishonest employees.

Personal Articles Floater

An inland marine endorsement or policy providing broad, scheduled coverage for high-value personal property such as jewelry, furs, and art.

Performance Bond

A type of surety contract bond guaranteeing that a contractor will complete work according to agreed contractual terms and specifications.

Law of Large Numbers

A statistical principle stating that as the number of similar exposure units increases, actual loss outcomes predictably align with expected loss projections, aiding in setting rates.

Errors and Omissions (E&O) Coverage

Professional liability insurance protecting businesses and individuals against claims of professional negligence, covering defense costs while excluding government fines.

Absolute Liability

Legal liability imposed automatically without proof of fault or negligence for damages originating from inherently dangerous conditions or activities, such as keeping wild animals.

Auto Medical Payments

Coverage under an auto policy paying medical and funeral expenses for the insured and passengers injured in the covered vehicle regardless of fault.

Vacancy Provision

A property policy provision that suspends or restricts coverage for specific perils (such as vandalism, sprinkler leakage, and glass breakage) after a building is vacant for more than 60 consecutive days.

Concealment

The intentional failure to disclose known material facts on an application or during a claim investigation.

Professional Liability

Liability insurance protecting service providers against claims resulting from errors, omissions, or failure to meet professional standards of care.

Consent to Settle Provision

A provision common in professional liability policies requiring the insurer to obtain the insured's consent prior to settling a claim.

Period of Restoration

The time frame during which business income losses are payable, starting from the loss date and ending when property should reasonably be repaired or restored.

Certificate of Insurance

A formal document describing coverage details that serves as evidence that an active policy is currently in force.

Other Insurance Clause

A policy condition establishing how losses are shared among multiple policies covering the same risk, enforcing the principle of indemnification.

Binder

A temporary oral or written agreement providing immediate coverage evidence before the formal policy is officially issued.

Fidelity Bond

A form of guarantee protecting an employer against losses resulting from dishonest or fraudulent acts committed by employees.

Occurrence

An event or continuous/repeated exposure to conditions over time that results in bodily injury or property damage.

HO-4 Policy

A homeowner insurance form designed specifically for tenants/renters covering personal property and personal liability.

Fair Credit Reporting Act

Federal legislation regulating consumer credit reporting, allowing consumers to correct inaccurate information and insert statement notes in credit agency reports.

Transfer of Risk

The fundamental concept of insurance whereby financial risk is shifted from an individual or entity to an insurance company.

Earthquake Policy Deductible

A policy deductible expressed as a specific percentage of the total coverage limit rather than a set dollar amount.