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Insurance Terminology

Definitions Of Terms Used With Insurance

​The maximum limit of coverage available under a liability policy during a specified period of time - usually one policy year or the policy period - regardless of the number of separate occurrences. Losses paid under coverages subject to aggregate limits reduce the amounts available for future losses. Aggregate limits may apply to a specific type of coverage, or they may apply to all losses under the policy.

An individual or business that has been given temporary custody of another´s property.

​A claim for injury or damage must be reported or filed during a policy period when coverage is in force in order to be covered. To ensure coverage is in force when a claim is made, the claims made policy needs to be continuously renewed (and premium paid). Generally, professional liability, high hazard products liability, and pollution liability policies are written on a claims made basis. "Tail" coverage may be purchased to extend the time to report a claim after the claims made policy has ended.

​Designed to provide coverage after the primary (underlying) liability policy limits have been exhausted. The coverage provided may not be as broad as the primary (underlying) liability policy.

​An excess liability policy that "follows form" usually provides coverage identical to that provided by the primary liability policy. Note: Although many excess policies are called following-form, most contain endorsements that limit coverage. A true following-form excess policy would state that, except for the policy limits, all of the provisions and conditions of the designated underlying primary policy are incorporated into and adopted by the excess policy. The policy would contain no other provisions.

​An obligation imposed as a matter of law upon a party for its negligence, violation of law, or failure to fulfill contractual obligations. Liability insurance policies provide coverage for an insured´s legal liability, excluding criminal acts, intentional torts or breach of contract.

​The party named in a loss payable clause, to whom insurance proceeds are to be paid in the event of damage to property in which the loss payee has an insurable interest. For example, some contracts that the state enters into require that the state name a vehicle or equipment owner as loss payee. This means that if the state damages or destroys the rented or leased equipment, the owner, not the state will get the money to repair the property.

​​A policy designed for specific needs and requirements of the insured, i.e., not a standardized insurance policy.

​An individual, business or organization that is designated by name as the insured(s) in an insurance contract. There can be others, although unnamed, who are protected by policy definition. A named insured under the policy has certain rights and duties. These include premium payment, premium refund, notice of cancellation and dividend participation.

​Covers all claims arising out of incidents occurring during the policy period, regardless of whether or not the policy is still in effect at the time that the claim is made. Occurrence-based coverage should be generally available, except on professional liability and pollution liability coverage.

​The portion of a loss that is assumed by the contractor (insured). It is similar to a deductible. However, it differs from a deductible because the contractor is responsible to perform all functions normally undertaken by an insurance company for claims within the SIR. The contractor must adjust and pay for losses within the SIR. A loss must exceed the SIR limit before the insurance company will handle the claim.

​The claimant under a liability policy. So called because the person making the claim is not one of the two parties, insured and insurer, to the insurance contract.

​​Provides excess coverage over another underlying liability policy. Many times, an umbrella policy provides broader coverage than the primary (underlying) liability policy.