Property Glossary A B C D E F G H I J L M N O P R S T U V W
Abandonment Clause
A clause in fire insurance policies and other property forms that
prohibits the insured from abandoning partially damaged property to the
insurer in order to claim a total loss.
Accounts Receivable Insurance
Insurance against the loss that occurs when an insured is unable to
collect outstanding accounts because of damage to or destruction of the
accounts receivable records by a peril covered in the policy.
Additional Living Expense Insurance
A contract to reimburse the insured for increased living costs when loss
of his property forces him to maintain temporary residence elsewhere.
Examples of these types of expenses are the cost for a hotel or motel,
the extra cost for restaurant meals, and the cost of using a laundromat.
The term Extra Expense Insurance is defined with regard to additional
expenses incurred by businesses. See also Loss of Use.
Agreed
Amount Clause
Under this clause, the insured and the insurer agree that the amount of
insurance carried will automatically satisfy the coinsurance clause. The
effect is to eliminate the necessity of determining whether or not the
amount carried is equal to the stated percentage of the actual cash
value indicated in the coinsurance clause.
Appurtenant Structures
Buildings on the same premises as the main building insured under a
Property Insurance policy. Most Dwelling Property Insurance policies
cover appurtenant structures under most circumstances.
Arbitration Clause
The provision in a Property Insurance contract which states that if the
insurer and insured cannot agree on an appropriate claim settlement,
each will appoint an appraiser, and these will select a neutral umpire.
A decision by any two of the three prescribes a settlement and binds
both parties to it.
Automatic Increase In Insurance Endorsement
See Inflation Guard Endorsement.
Basic Coverage Form
Any of the commercial or personal lines property forms which provide
basic coverages. These forms generally provide the most limited
coverage, which is surpassed by broad forms and special forms.
Blanket Insurance
A form of Property Insurance that covers, in a single contract, either
multiple types of property at a single location or one or more types of
property at multiple locations.
Boiler
and Machinery Insurance
Insurance against the sudden and accidental breakdown of boilers,
machinery, and electrical equipment. Coverage is provided on (1) damage
to the equipment, (2) expediting expenses, (3) property damage to the
property of others, and (4) supplementary payments; and (5) automatic
coverage is provided on additional objects. Coverage can be extended to
cover consequential losses and loss from interruption of business.
Broad
Form
A term generally used to designate policies that provide insurance for
multiple types of perils over and above the usual basic perils, or
additional coverages beyond standard coverages.
Broad Theft Coverage Endorsement.
This form may be attached to a dwelling policy to provide theft coverage for a named insured who is an owner occupant.
Builder's Risk Coverage Form
A commercial property coverage form specifically designed for buildings
in the course of construction.
Building and Personal Property Coverage Form
A commercial property coverage form designed to insure most types of
commercial property (buildings, or contents, or both). It is the most
frequently used commercial property form, and has replaced the General
Property Form, Special Building Form, Special Personal Property Form,
and others.
Business Income Coverage Form
A commercial property form providing coverage for "indirect losses"
resulting from property damage, such as loss of business income and
extra expenses incurred. It has replaced earlier Business Interruption
and Extra Expense forms.
Business Interruption Insurance
A time element coverage that pays for loss of earnings when operations
are curtailed or suspended because of property loss due to an insured
peril. Now referred to as business income insurance. See Business Income
Coverage Form.
Business Personal Property
Traditionally known as "contents," this term actually refers to
furniture, fixtures, equipment, machinery, merchandise, materials, and
all other personal property owned by the insured and used in the
insured's business.
Causes of Loss
Under the latest commercial property forms, this term replaces the
earlier term "perils" insured against.
Causes
of Loss Forms
Commercial property forms stating the perils insured against, additional
coverages provided, and exclusions that apply. There are four Causes of
Loss Forms _ Basic, Broad, Special and Earthquake.
Civil
Commotion
An uprising of a large number of people, usually resulting in damage to
property. This term is generally used to describe one of the extended
coverage perils in the Extended Coverage Endorsement.
Coinsurance Clause
A clause under which the insured shares in losses to the extent that he
is underinsured at the time of loss. The insurer grants a reduced rate
to the insured providing he carries insurance 80, 90, or 100% to value.
If, at the time of loss, he carries less than required, he must share in
his loss. For example, if an insured has a building worth $100,000 and
carries an 80% coinsurance clause, it means that he agrees to carry at
least $80,000 of insurance. If the insurance carried equaled $60,000,
then any loss under the policy would be paid for on the basis of the
comparison of $60,000 (amount carried) divided by $80,000 (amount agreed
upon in advance) times the amount of the loss. Thus, the insured above
would only receive 75% of a loss or $7,500 for a $10,000 loss.
Condominium Association Coverage Form
A commercial property form designed to cover the joint insurance needs
of members of a condominium association who collectively own commercial
property.
Condominium Unit Owners Coverage Form
A commercial property form designed to cover the individual needs of
commercial (not residential) condominium unit-owners.
Consequential Loss (or Damage)
An indirect loss arising out of the policyholder's inability to use the
property over a period of time, as opposed to a direct loss that happens
almost instantaneously. Business Interruption, Extra Expense, Rents
Insurance, and Leasehold Interest are the most common coverages included
under the category of Consequential Loss coverages. (2) A loss not
directly caused by a peril insured against, such as spoilage of frozen
foods caused by fire damage to the refrigeration equipment. See also
Indirect Loss, and contrast with Direct Loss.
Data Processing Coverage
A special form providing protection for loss due to the breakdown of
data processing systems. It also includes coverage for the additional
expense of putting the system back into operation.
Debris
Removal Clause
A provision that may be included in a Property policy contract to
provide the insured with indemnification for expenditures incurred in
the removal of debris produced by the occurrence of an insured peril.
Ordinarily a Property policy covers only the direct damage caused by an
insured peril.
Declaration
A term used in insurance other than Life or Health to denote that
portion of the contract in which is stated such information as the name
and address of the insured, the property insured, its location and
description, the policy period, the amount of insurance coverage,
applicable premiums, and supplemental representations by the insured.
Demolition Insurance
Insurance written to cover the cost of demolition excluded by a
demolition clause. It may be endorsed to Property Insurance for an
additional premium. See also Demolition Clause.
Depreciation Insurance
See Replacement Cost Insurance.
Direct
Loss (or Damage)
A loss which is a direct consequence of a particular peril. Fire damage
to a refrigerator would be a direct loss. Spoiling of food in the
refrigerator as a result of the fire damage would be an indirect loss.
Contrast with Indirect Loss and Consequential Loss. (PR)
Disappearing Deductible
A type of deductible that gradually disappears as the loss gets larger.
If the deductible is $50, the insurer will pay 111% of that part of the
loss which is in excess of $50. The deductible on losses between $50 and
$500 is gradually reduced by this system, and if the loss reaches $500,
the full amount is covered.
Dwelling Forms
A policy form designed specifically to cover a dwelling building and the
personal property in it plus other additional coverages. There are
several forms available, depending on what coverage is to be provided.
Earnings Insurance
A form of Gross Earnings Business Interruption Insurance, whose
principal feature is the lack of a coinsurance clause. It is designed
for small risks, and the maximum amount of loss the insured can collect
in any 30-day period is established when the policy is written.
Earth
Movement
A peril including landslide, mud flow, earth sinking, rising or
shifting, and earthquake. Usually excluded on homeowners' and commercial
property policies.
Earthquake Insurance
Insurance covering damage caused by an earthquake as defined in the
contract.
Electronic Data Processing (EDP) Coverage
Specialized type of insurance designed to cover computer equipment, data
systems, information storage media and expenses or income loss related
to EDP losses.
Explosion Insurance
Insurance against loss of property due to explosion but not including
explosion of steam boilers, pipes, and certain pressure instruments.
Most commonly written as part of the Extended Coverage Endorsement.
Extended Coverage (EC)
A common extension of property insurance beyond coverage for fire and
lightning. Extended coverage adds insurance against loss by the perils
of windstorm, hail, explosion, riot and riot attending a strike,
aircraft damage, vehicle damage, and smoke damage. At one time EC was
added by endorsement. In recent years it has been included on many forms
as either an optional coverage or as part of the minimum coverages
provided.
Extra
Expense Insurance
A form that provides reimbursement to the insured for the extra expenses
reasonably incurred to continue the operation of a business when the
described property has been damaged by a peril covered by the contract.
This insurance is normally used by businesses where continuity of
operation, regardless of cost, is a necessity as, for example, any
business that would permanently lose customers if there were any
suspension of operations. The term Additional Living Expense Insurance
is defined with regard to extra expenses incurred by individuals, and
such coverage is a common feature of homeowner policies.
FAIR Plan
Fair Access to Insurance Requirements. A pooling plan reinsured by the
United States government that makes insurance available to those in
inner-city or other high risk areas who cannot obtain insurance through
normal channels. Coverages for fire and allied perils is available, with
considerably high limits, after inspection of the premises.
Fair
Rental Value Coverage
Insurance that pays the loss of rental value, minus expenses which do
not continue, when property rented to others or held for rental is
damaged by a peril insured against.
Fire
Combustion which is rapid enough to produce a flame or glow. A fire, for
purposes of Property Insurance, must be "hostile," which means it is not
in a place in which it is intended to be. Fires in their proper
contained area are called "friendly fires" and are not covered under
most basic Property Insurance policies.
Fire
Department Service Clause
A provision in a Fire Insurance policy that provides the insured with
indemnification for charges he incurs due to action by a fire department
to save his property. It is useful for property located outside the
jurisdiction of the nearest fire department and where the call will be
answered only for a fee.
Fire
Legal Liability
An insurance policy which protects the insured against liability
incurred when his negligent actions result in the destruction of
property which is in his care, custody or control.
Fire
Resistive Construction
A building which has exterior walls, floors, and roof constructed of
masonry or other fire-resistive materials.
Flat
Deductible
A deductible which is not one of the disappearing or franchise type. A
specific amount deducted from each loss or claim.
Flood
A general and temporary condition of partial or complete inundation of
normally dry land areas from (1) overflow of inland or tidal waters, (2)
the unusual accumulation and runoff of surface waters from any source,
or (3) abnormal, flood-related erosion and undermining of shorelines.
Flood also means inundation from mud flows caused by accumulations of
water on or under the ground, as long as the mud flow and not a
landslide is the proximate cause of loss.
Flood
Insurance
A form of insurance designed to reimburse property owners from loss due
to the defined peril of flood. Usually sold in connection with a
government Flood Insurance plan.
Frame
A type of construction. A frame building is primarily made with wood
frames and joists.
Full
Reporting Clause
Under this clause, an insured is required to report values periodically.
The clause provides for a penalty to the insured if true values are not
reported.
Glass Coverage Form
A commercial property form used to insure plate glass, lettering, frames
and ornamentation. It has replaced earlier commercial glass insurance
forms.
Grading Schedule for Cities and Towns
A schedule prepared by the National Board of Fire Underwriters for the
purpose of determining which of ten grades to assign to a city for fire
rating purposes, based on such factors of fire protection as water
supply.
Gross
Earnings
An accounting term which is arrived at by subtracting the cost of goods
sold from the total sales. Traditionally, the term was used primarily in
Business Interruption Insurance as the basis for determining how much
insurance a policyholder should carry. The latest Business Income
insurance forms have dropped this term.
Homeowners Policy
A Property and Liability Insurance contract that provides insurance
against any of the Property and Liability perils to which a homeowner or
renter is exposed.
Increased Hazard
Property Insurance policies provide that coverage shall be suspended
when the hazard in a risk is increased beyond that contemplated when the
insurance was written. If a dwelling owner commences manufacturing
dynamite in his home, the hazard is extremely increased, and coverage
could be denied by the insurer if there were a loss.
Indirect Loss (or Damage)
Loss resulting from a peril but not caused directly and immediately by
that peril. For example: Loss of property due to fire is a direct loss,
while the loss of rental income as the result of the fire would be an
indirect loss. See also Consequential Loss.
Inflation Guard Coverage
Coverage which provides for automatic periodic increases in the amount
of insurance on buildings to keep an appropriate "limit to value"
considering the effect of inflation on building replacement costs. An
endorsement is usually used to add this coverage to a Homeowners Policy.
On the latest commercial property forms, inflation guard coverage is an
option that may be activated by an entry in the declarations.
Insurance Services Office (ISO)
An organization of the Property and Liability Insurance business
designed to gather statistics, promulgate rates, and develop policy
forms.
Joisted Masonry Construction
A building which has exterior walls constructed of masonry materials,
such as adobe, brick, concrete, gypsum block, hollow concrete block,
stone, tile, or other similar materials, and a roof and floor
constructed of combustible materials. A floor which rests directly on
the ground is an exception and may be disregarded.
Liberalization Clause
A clause in Property Insurance contracts which provides that if policy
or endorsement forms are broadened by legislation or ruling from rating
authorities and no additional premium is required, then all existing
similar policies will be construed to include the broadened coverage.
Limited Theft Coverage Endorsement
This form may be attached to a Dwelling Policy to provide theft coverage
for a named insured who is not an owner occupant.
Loss
Assessment Charge
An insured's share of a loss assessment for property damage or liability
which is charged by a corporation or association of property owners.
Homeowners policies provide some coverage for loss assessments charged
against the insured as owner or tenant of a residence premises.
Loss
of Use Insurance
Coverage to compensate an insured for the loss of use of his property if
it cannot be used because of a peril covered by the policy. See also
Additional Living Expenses.
Loss
Payable Clause
A provision in Property Insurance contracts that authorizes payment to
persons other than the insured to the extent that they have an insurable
interest in the property. This clause may be used when there is a lien
or loan on the property being insured, and it protects the lender.
Machinery Breakdown Insurance
See Boiler and Machinery Insurance.
Market
Value Clause
A provision that may be used in certain Property Insurance forms which
obligates an insurer to pay the established market price of destroyed or
damaged stock rather than its cost to the insured, as is usually
provided in the Standard Fire policy. This coverage is only available to
manufacturers with finished products, not to wholesalers or retailers.
Masonry Noncombustible Construction
A building which has exterior walls constructed of masonry materials,
such as adobe, brick, concrete, gypsum block, hollow concrete block,
stone, tile, or other similar materials, with floors and roof
constructed of metal or other noncombustible materials.
Mercantile Risk
A term most often used in Property Insurance meaning a retail or
wholesale risk as contrasted with a service risk, a manufacturing risk,
or a habitational risk.
Mobile
Home Policy
A Homeowners policy written on a mobile home which is permanently
situated.
Modified Fire-Resistive Construction
A building which has exterior walls, floors and roof constructed of
masonry or fire-resistive materials.
Mortgage (or Mortgagee) Clause
A provision attached to a Fire or other direct damage policy that covers
mortgaged property, specifying that the loss reimbursement shall be paid
to the mortgagee as the mortgagee's interest may appear, that the
mortgagee's rights of recovery shall not be defeated by any act or
neglect of the insured, and giving the mortgagee other rights,
privileges, and duties. For instance, one duty is that the mortgagee
must report to the insurer any change in hazards that he becomes aware
of.
Mortgagee
The creditor to whom a mortgage is given and who lends money on the
security of the value of the property mortgaged.
Mortgagor
The debtor who receives money and in turn grants a mortgage on his or
her property as security for a loan.
Named Perils
Perils specifically covered on property insured. Contrast Named Perils
Insurance with All-risks Insurance, which covers all losses not
specifically excluded. e rates and forms.
National Flood Insurance Program (NFIP)
Federal program providing flood insurance for fixed property. Under a
"dual" program coverage may be written directly by the NFIP or by
private carriers whose losses may be reimbursed by the NFIP.
Occupancy
This refers to the type or character of use of the property in question.
The type of occupancy has a bearing on its desirability and also effects
the rate for the policy.
Off
Premises
A clause in a Property Insurance contract extending coverage away from
the premises described in the policy. The amount of coverage away from
the premises is usually restricted to a percentage of the total coverage
on the premises, e.g., 10%.
Other
Structures
Structures, such as a garage or storage shed, which are separated from
an insured dwelling by a clear space, or are connected only by a fence
or utility line. Dwelling and Homeowner policies provide coverage for
other structures.
Peak Season Endorsement
An endorsement which provides increased amounts of coverage on
inventories during peak seasons, beginning and ending on dates specified
in the endorsement.
Personal Property
Any property of an insured other than real property. Homeowner policies
protect the personal property of family members, and commercial forms
are used to protect many types of business personal property of an
insured.
Personal Property Floater
A Broad Form policy covering all personal property worldwide, including
at the insured's home. Similar coverage is available by endorsement as
part of the "Special" Homeowners policy form.
Physical Damage
A generic term indicating actual damage to property.
Power
Interruption Insurance
This coverage indemnifies the insured in the event of loss due to the
interruption of power supplied by a public utility and caused by any of
the perils insured against.
Property Insurance
Insurance that indemnifies a person with an interest in physical
property for its loss or the loss of its income producing abilities.
This definition encompasses all lines of insurance written by Property
and Inland Marine insurers and can also include certain kinds of
insurance written by Casualty insurers, e.g., Burglary and Plate Glass
coverages.
Protection Class
The grading of fire protection, determined by the Grading Schedule of
Cities and Towns, for a given area. This designation is used for all
fire rating except for dwellings, in which case the Dwelling Class is
used.
Removal
Removing property to protect it from loss. Most personal and commercial
property forms cover damage to property at another location when it has
been removed from the premises to protect it from loss by a peril
insured against.
Rental
Value Insurance
A form of Property Insurance that provides indemnity (1) for the loss of
the rental value of property when the owner or tenant is deprived of the
use of the property because it has been damaged by an insured peril, or
(2) for the loss by the owner-landlord of the rent that would have been
payable by a tenant of the property, under the terms of the lease or by
statute, when he is relieved of liability for the payment of rent during
a period of untenantability due to an insured peril.
Replacement Cost
The cost of replacing property without a reduction for depreciation. By
this method of determining value, damages for a claim would be the
amount needed to replace the property using new materials. Contrast with
Actual Cash Value.
Replacement Cost Insurance
Insurance that provides that loss will be paid on a replacement cost
basis. See also Replacement Cost.
Reporting Form
The form for a periodic report to an insurer by an insured that covers
the fluctuating values of stocks of merchandise, furniture and fixtures,
and improvements and betterments. Premiums are adjusted annually, based
on the average values insured during the policy period. An insured with
fluctuating inventories might use this form.
Residence Premises
In homeowners insurance, the dwelling, other structures and grounds, or
that part of any other building where the named insured lives.
Schedule
A list of individual items covered under one policy, such as various
buildings and contents.
Schedule Policy
An insurance contract that lists separate kinds of property, separate
locations, or separate insurance coverages with the amount of insurance
applying to each.
Schedule Rating Plan
(1) Applying debits or credits within established ranges for various
characteristics of a risk which are either below or above average
according to an established schedule of items. (2) Under Liability and
Automobile Insurance, the schedule rating plan has been designed to
allow credits and debits for various good or bad features of a
particular commercial risk. An example in automobile schedule rating
would be allowing credits for driver training classes or fleet
maintenance programs.
Sinkhole Collapse
The peril of a sudden sinking or collapse of land into underground empty
spaces created by the action of water on limestone or similar rock
formations. This peril is now covered by the latest commercial property
forms. Other forms of earth movement continue to be excluded in most
cases.
Special Building Form
A form which provides all-risk coverage on commercial buildings, subject
to certain exclusions. It was once the broadest coverage available on
buildings. Largely replaced by the Building and Personal Property
Coverage Form.
Special Coverage Form
Any of the commercial or personal lines property forms which provide
coverage on an all-risk type basis. These forms provide the broadest
coverage and do not list covered perils, but do include a lengthy list
of exclusions.
Special Personal Property Form
A form which provides all-risk coverage on the personal property
(contents) of commercial risks with certain exclusions. It was once the
broadest coverage available on commercial contents. Largely replaced by
the Building and Personal Property Coverage Form.
Specific Insurance
A policy which describes specifically the property to be covered. This
is in contrast to a policy which covers on a blanket basis all property
at one or more locations without specific definitions. In the case of
overlapping coverages, specific insurance is considered the primary one.
Specific Rate
A rate applying to an individual piece of property.
Specified Perils
See Named Perils.
Sprinkler Leakage Insurance
Insurance against damage done by the accidental discharge of water from
an automatic sprinkler system, as contrasted with discharge because of
heat from a fire.
Sprinkler Leakage Legal Liability Insurance
Insurance which covers the legal liability of an insured who has a
sprinkler leakage loss which damages the property of others, on a floor
below or in adjoining premises, for instance.
Stated
Amount
An agreed amount of insurance which is shown on the policy, and which
will be paid in the event of total loss regardless of the actual value
of the property.
Statement of Values
Sometimes property is written using a blanket rate and one single limit
of liability applying to all locations. In order to determine the
blanket or average rate, a rating bureau or company requires an insured
to submit a declaration of the amounts of value at each separate
location on a Statement of Values form.
Tenants Policy
A Homeowners form which is specifically designed for people who rent.
Time
Element Insurance
Insurance which covers expenses consequent to damage or destruction by
an insured peril that continue over a period of time. The amount paid
depends on the length of time during which the expenses accumulate. An
example would be Business Interruption insurance, which pays for the
loss of earnings during the time it takes to repair the property.
Unoccupied
Refers to property which may be furnished or have furnishings in it but
is not occupied or being lived in. The Standard Fire policy prohibits
unoccupancy beyond a specified period of time. This term is contrasted
with vacant, which means that there is nothing within the building.
V&MM, or VMM
Vandalism and Malicious Mischief. Damage or destruction to property
which is willful. Traditionally VM&M coverage was optional on many forms
or added by endorsement, but today it is automatically covered by basic
commercial and homeowner forms.
Vacant
A term used in Property Insurance to describe a building that has
nothing in it. This goes one step beyond the description of unoccupied.
The Standard Fire policy prohibits vacancy beyond a specified period of
time. Contrast with Unoccupied.
Valuable Papers and Records
An all-risk coverage for physical loss or damage to valuable papers and
records of the insured. It includes practically all types of printed
documents or records except money.
Value
Reporting Form
Commercial form designed for businesses that have fluctuating
merchandise values during the year. As values are reported (monthly,
quarterly or annually) the amount of insurance is adjusted . Reporting
forms help eliminate problems of over-insurance and under-insurance, as
well as the need to continually endorse a policy.
Valued
Policy
A policy which states that in the event of a total loss, a specific
amount will be paid, that being the amount stated in the policy. The
effect is to eliminate the need for determining the actual cash value of
an item of property in the event of a total loss. It is generally used
with certain more valuable items, such as fine arts, antiques, and furs.
See also Valued Policy Law.
Vandalism and Malicious Mischief
See V&MM.
Waiver of Coinsurance
A provision in a Property policy that the coinsurance clause will not
apply if the total loss does not exceed a stated amount, such as 2% of
the sum insured or the amount of $2,500, whichever is greater. The
reason for such a provision is to eliminate having to do a large
inventory in order to determine whether or not the insured has complied
with the coinsurance clause, especially where very small losses are
involved.
Windstorm
Wind of sufficient violence to be capable of damaging insured property.
Windstorm coverage has traditionally been part of extended coverage
(EC), but today it is usually included automatically as part of basic
coverages.
© 2004 Goodmann Insurance Services, Inc. All rights reserved.
Goodmann Insurance Services
2774 University Ave.
Dubuque, IA 52001
563-556-3232 phone
563-556-1142 fax