Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z SEE ALL
  • ACTUAL CASH VALUE
    A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See REPLACEMENT COST)
  • ADDITIONAL LIVING EXPENSES
    Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
  • ADMITTED ASSETS
    Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See ASSETS).
  • AFFINITY SALES
    Selling insurance through groups such as professional and business associations.
  • AGENT
    Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
  • ALIEN INSURANCE COMPANY
    An insurance company incorporated under the laws of a foreign country, as opposed to a “foreign” insurance company which does business in states outside its own.
  • ALLIED LINES
    Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.
  • ALTERNATIVE MARKETS
    Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and self-insurance, are also included.
  • APPRAISAL
    A survey to determine a property’s insurable value, or the amount of loss.
  • ARSON
    The deliberate setting of a fire.
  • ASSIGNED RISK PLANS
    Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See RESIDUAL MARKET)
  • BALANCE SHEET
    Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.
  • BASIS POINT
    0.01 percent of the yield of a mortgage, bond or note. The smallest measure used.
  • BENEFICIARY
    The person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs.
  • BOOK OF BUSINESS
    Total amount of insurance on an insurer’s books at a particular point in time.
  • BURGLARY AND THEFT INSURANCE
    Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
  • CAPTIVE AGENT
    A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See EXCLUSIVE AGENT)
  • CATASTROPHE
    Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million.
  • CATASTROPHE FACTOR
    Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.
  • CATASTROPHIC GROUND COVER COLLAPSE
    Catastrophic Ground Cover Collapse offers protection if the insured property experiences all of the following: Geological activity that results in the abrupt collapse of the ground cover A depression in the ground cover clearly visible to the naked eye Structural damage to the building, including the foundation The insured structure being condemned and ordered to be vacated by the governmental agency Structural damage consisting merely of the settling or cracking of a foundation, structure or building does not constitute a loss resulting from a catastrophic ground cover collapse.
  • CITIZENS PROPERTY INSURANCE CORPORATION REGULAR ASSESSMENT
    Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Regular Assessment. A broad base of licensed Florida property and casualty insurance companies, including property and automobile insurers are assessed if a deficit remains. These companies are required to remit their share of the Regular Assessment to Citizens within 30 days of the levy and are permitted to recoup this amount by passing it on their policyholders at renewal. Insureds who purchase coverage from surplus lines insurers are also subject to the regular assessment. This assessment can be up to 6 percent per account of assessable premium. That means that assessable insurers, and thus their policyholders, could be assessed a maximum of 18 percent of assessable premium if there is a deficit in all 3 of Citizens' accounts. This assessment is a one-time assessment. Citizens policyholders are not charged this assessment. If the Citizens Policyholder Surcharge and the Regular Assessment do not cure a deficit for any account, the Emergency Assessment is levied.
  • COVERAGE
    Synonym for insurance.
  • COVERAGE B
    Other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. This coverage does not apply to land, including land on which the other structures are located.
  • COVERAGE D
    Coverage D or Loss of Use pays out in the event that you are unable to live in your primary home due to a covered loss.
  • CRIME INSURANCE
    Term referring to property coverages for the perils of burglary, theft and robbery.
  • DEDUCTIBLE
    The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
  • DIRECT WRITERS
    Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, by telephone or via the Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.
  • EARNED PREMIUM
    The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires
  • EMERGENCE MANAGEMENT PREPAREDNESS AND ASSISTANCE TRUST FUND
    Established in 1993 by the Florida Legislature, the trust fund is funded by surcharges on certain insurance policies and the money is used to fund emergency management activities at both the state and local level. Each of Florida's 67 counties receives an equal share annually from these funds.
  • EQUITY
    In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.
  • EXCESS AND SURPLUS LINES
    Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) and must be purchased from a non admitted carrier.
  • EXCLUSIVE AGENT
    A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company. (See CAPTIVE AGENT)
  • EXPERIENCE
    Record of losses.
  • EXTENDED COVERAGE
    An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
  • FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS
    Insurance pools that sell property insurance to people who can’t buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses. (See RESIDUAL MARKET)
  • FIRE INSURANCE
    Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
  • FIRST-PARTY COVERAGE
    Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services.
  • FLOOD INSURANCE
    Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy. (See ADVERSE SELECTION)
  • FLORIDA INSURANCE CATASTROPHE FUND
    Structured as a tax exempt state trust fund under the direction of the State Board of Administration. A nine member advisory council provides the SBA with information and advice.
  • FRAUD
    Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents and brokers for financial gain.
  • FUTURES
    Agreement to buy a security for a set price at a certain date. Futures contracts usually involve commodities, indexes or financial futures.
  • HARD MARKET
    A seller’s market in which insurance is expensive and in short supply. (See PROPERTY/CASUALTY INSURANCE CYCLE)
  • HO-4 –CONTENTS BROAD FORM
    The HO-4 (aka Contents Broad Form) is a modified HO-2 policy for renters of rooms, apartments, or houses. This named-perils policy not only covers personal property, both within the rented dwelling and outside, but also includes liability insurance of at least $100,000 for damage to the property or for injuries to other people in the rented dwelling. Coverage is also provided for any alterations to the structure by the renter, but is limited to 10% of the purchased coverage for personal property.
  • HOMEOWNERS INSURANCE POLICY
    The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy. Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately.
  • HURRICANE DEDUCTIBLE
    A percentage or dollar amount added to a homeowner’s insurance policy to limit an insurer’s exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the storm for the deductible to be triggered and the extent of the high risk area, vary from insurer to insurer and state to state.
  • INCURRED BUT NOT REPORTED LOSSES / IBNR
    Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.
  • INDEPENDENT AGENT
    Agent who is self-employed, is paid on commission, and represents several insurance companies. (See CAPTIVE AGENT)
  • INSURABLE RISK
    Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.
  • INSURANCE POOL
    A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes. (See FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS/FAIR PLANS; JOINT UNDERWRITING ASSOCIATION/JUA)
  • INSURANCE SCORE
    Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race. Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.
  • INSURED
    The policyholder, the person(s) protected in case of a loss or claim.
  • JOINT UNDERWRITING ASSOCIATION (JUA)
    Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverage's, such as medical malpractice. (See ASSIGNED RISK PLANS, RESIDUAL MARKET)
  • LIMITS
    Maximum amount of insurance that can be paid for a covered loss.
  • LIQUIDITY
    The ability and speed with which a security can be converted into cash.
  • LLOYDS
    Corporation formed to market services of a group of underwriters. Does not issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd’s of London, and is found primarily in Texas.
  • 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.
  • LOSS OF USE
    A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
  • LOSS RESERVES
    The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.
  • OPEN COMPETITION STATES
    States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.
  • ORDINANCE OR LAW COVERAGE
    Coverage for the additional loss caused by the enforcement of laws that regulate building repair or construction.
  • PACKAGE POLICY
    A single insurance policy that combines several coverage's previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.
  • POLICY
    A written contract for insurance between an insurance company and policyholder stating details of coverage.
  • PREMISES
    The particular location of the property or a portion of it as designated in an insurance policy.
  • PREMIUM TAX
    A state tax on premiums paid by its residents and businesses and collected by insurers.
  • PREMIUMS WRITTEN
    The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.
  • PRIME RATE
    Interest rate that banks charge to their most creditworthy customers. Banks set this rate according to their cost of funds and market forces.
  • PROOF OF LOSS
    Documents showing the insurance company that a loss occurred.
  • PROPERTY/CASUALTY INSURANCE CYCLE
    Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.
  • RATE
    The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.
  • RATING AGENCIES
    Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.
  • REINSURANCE
    Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid. (see TREATY REINSURANCE, FACULTATIVE REINSURANCE)
  • REPLACEMENT COST
    Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
  • RESERVES
    A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid.
  • RETENTION
    The amount of risk retained by an insurance company that is not reinsured.
  • RETROSPECTIVE RATING
    A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and minimum limit based on actual loss experience. It is available to large commercial insurance buyers.
  • RISK
    The likelihood of a loss.
  • RISK-BASED CAPITAL
    The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.
  • Roof Deck Attachments
    The material used to construct roof decks, and the methods used to attach the deck to the roof framing members can influence the likelihood of failure in high winds. •Attachment A – Plywood/OSB roof sheathing attached to roof trusses/rafters by 6 penny nails (2” x 0.131” diameter) or greater which are properly spaced at a maximum of 6” along the edge and 12” in the field on 24” truss/rafter spacing. OR Batten decking or Skipped decking (typically used on roof decks supporting wood shakes or wood shingles). OR Any system of screws, nails, adhesives, other roof deck fastening systems or truss/rafter spacing that has an equivalent mean uplift resistance of 55 pounds per square foot or more as evidenced by laboratory uplift tests on & full size sheets of plywood/OSB. •Attachment B – Plywood/OSB roof sheathing with a minimum thickness of 1/2" attached to roof trusses/rafters by 8 penny (2.5” x 0.131” diameter) nails or greater which are properly spaced at a maximum of 6” along the edge and 12” in the field on 24” truss/rafter spacing. OR Any system of screws, nails, adhesives, other roof deck fastening systems, or truss/rafter spacing that has an equivalent mean uplift resistance of 103 pounds per square foot or more as evidenced by laboratory uplift tests on full size sheets of plywood/OSB. •Attachment C – Plywood/OSB roof sheathing with a minimum thickness of 1/2" attached to roof trusses/rafters by 8d nails (2.5” x 0.131” diameter) which are properly spaced at a maximum of 6” along the edge and 6” in the field on 24” truss/rafter spacing. OR Dimensional Lumber or Tongue & Groove deck roof composed of ¾” thick boards with nominal widths of 4” or more. OR Any system of screws, nails, adhesives, other roof deck fastening systems, or truss/rafter spacing that has an equivalent mean uplift resistance of 182 pounds per square foot or more as evidenced by laboratory uplift tests on full size sheets of plywood/OSB.
  • ROOF-WALL Connection
    Refers to how the roof framing (i.e. trusses) is anchored to the wall to resist the upward force that strong winds can sometimes exert on the roof. Following are the typical types of connections that will require. Toe-Nail – Rafter/truss anchored to top plate of wall using nails driven at an angle through the rafter/truss and attached to the top plate of the wall. Clips – Metal clips installed on each truss/rafter that attach to the side only of the truss/rafter member and to the wall frame. Metal clip should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall. Single Wraps – Metal straps installed on each truss/rafter that wrap over the top of the truss/rafter and attach to the wall frame in one location. Metal strap should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall. Double Wraps – Metal straps installed on each truss/rafter that wrap over the top of the truss/rafter and attach to the wall frame in two locations. Metal strap should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall at each location.
  • SCHEDULE
    A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
  • SEVERITY
    Size of a loss. One of the criteria used in calculating premiums rates.
  • SINKHOLE DEDUCTIBLE
    The sinkhole deductible applies to any loss covered by the Sinkhole Loss Coverage endorsement.
  • SOLVENCY
    Insurance companies’ ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure. (See SPREAD OF RISK)
  • SURPLUS
    The remainder after an insurer’s liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims.
  • TERM LIFE INSURANCE
    A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable but premiums increase with age.
  • TOTAL LOSS
    The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
  • TREATY REINSURANCE
    A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer’s business.
  • UNDERINSURANCE
    The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.
  • UNOCCUPIED
    Property without people occupying or living within it. As opposed to vacant property, unoccupied property may hold furnishings.
  • WIND DEDUCTIBLE
    A separate, higher deductible provision that applies to loss caused by wind or hail. Often, the deductible is expressed as a percentage of the value of the property or, in a homeowners policy, as a percentage of the dwelling limit, rather than as a flat dollar amount. In some Atlantic and Gulf coast states, insurers have filed a variation of this deductible hat applies an even higher percentage deductible in the event of loss from a "named storm," such as a hurricane.
  • WRITE
    To insure, underwrite, or accept an application for insurance.
  • ACTUARY
    An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firm's reserves, determines rates and rating methods, and determines other business and financial risks.
  • ADJUSTER
    An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
  • ADVERSE SELECTION
    The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders
  • AGENCY COMPANIES
    Companies that market and sell products via independent agents.
  • ALEATORY CONTRACT
    A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event. Insurance contracts are aleatory because the policy owner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. Contrast with commutative contract.
  • ALL OTHER PERIL (AOP) DEDUCTIBLE
    Set amount that is applied to all covered losses other than hurricane losses. The second deductible applies only to hurricane losses. Both deductibles apply to Coverage's A, B, C and D.
  • ALTERNATIVE DISPUTE RESOLUTION/ADR
    An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of and independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
  • ANTITRUST LAWS
    Laws that prohibit companies form working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
  • ARBITRATION
    Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
  • ASSETS
    Property owned, in this case by the insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companied from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See ADMITTED ASSETS)
  • ASSIGNMENT
    An agreement under which one party – the assignor – transfers some or all of his ownership rights in a particular property, such as a life insurance policy or an annuity contract, to another party – the assignee.
  • BANK HOLDING COMPANY
    A company that owns or controls one or more banks. The Federal Reserve has responsibility for regulating and supervising bank holding company activities, such as approving acquisitions and mergers and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the Comptroller of the Currency or the FDIC.
  • BCEG CLASS
    Building Code Effectiveness Grading. The BCEG scale is a Florida statute designed to evaluate a community's building code and the enforcement of that code. All Florida communities are required to adopt the statute and you may receive a credit based on your community's grade. Each community receives a grade of 1-10, with a 1 being the best. Refer to your policy documents for your community's grade. For questions regarding your community's grade, you should contact your community's Building Department.
  • BINDER
    Temporary authorization of coverage issued prior to the actual insurance policy.
  • BROKER
    An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to see variable annuities, which are similar to stock market-based investments.
  • CAPACITY
    The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.
  • CAPTIVES
    Insurers that are created and wholly owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.
  • CATASTROPHE DEDUCTIBLE
    A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.
  • CATASTROPHE MODEL
    Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.
  • CITIZENS PROPERTY INSURANCE CORPORATION EMERGENCY ASSESSMENT
    Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Emergency Assessment. A broad base of property and casualty policyholders, including Citizens policyholders, is assessed directly by their insurer at renewal. For each of the 3 Citizens accounts, this assessment may not be more than 10 percent of the policy premium or 10 percent of the remaining deficit, whichever is greater. That means that assessable policyholders could be assessed a maximum of 30 percent of assessable premium if there is a deficit in each of the 3 Citizens accounts. The Emergency Assessment can be spread over multiple years, which could reduce the burden on Florida policyholders.
  • COLLATERAL
    Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. Also called security.
  • COVERAGE A
    The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and Materials and supplies located on or next to the "residence premises" used to construct, alter or repair the dwelling or other structures on the "residence premises." This coverage does not apply to land, including land on which the dwelling is located.
  • COVERAGE C
    Personal property owned or used by an "insured" while it is anywhere in the world. By will cover personal property owned by: Others while the property is on the part of the "residence premises" occupied by an "insured"; A guest or a "residence employee," while the property is in any residence occupied by an "insured."
  • COVERAGE F
    Medical Payments for a set amount of time payable towards injuries sustained by someone that is not the insured or regular resident of the property.
  • DECLARATIONS
    The first part of the contract, and contains information derived from the insurance application, which provides the information for rating risk. All declarations contain the name of the insured, the insurer, and the property or activity to be insured, the period covered, the policy number, and the amount of the premium. Property insurance also lists the location of the property, and the size of deductible.
  • DIRECT PREMIUMS
    Property/casualty premiums collected by the insurer from policyholders, before reinsurance premiums are deducted. Insurers share some direct premiums and the risk involved with their reinsurers.
  • DOMESTIC INSURANCE COMPANY
    Term used by a state to refer to any company incorporated there.
  • EARTHQUAKE DEDUCTIBLE
    This is the amount your loss must exceed in order for your policy to begin paying for earthquake-related losses.
  • ENDORSEMENT
    Amendment to the policy used to add or delete coverage. Sometimes referred to as a Floater or Rider.
  • ERRORS AND OMISSIONS COVERAGE / E&O
    A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
  • EXCLUSION
    A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.
  • EXPENSE RATIO
    Percentage of each premium dollar that goes to insurers’ expenses including overhead, marketing and commissions.
  • EXPOSURE
    Possibility of loss.
  • FACULTATIVE REINSURANCE
    A reinsurance policy that provides an insurer with coverage for specific individual risks that are unusual or so large that they aren’t covered in the insurance company’s reinsurance treaties. This can include policies for jumbo jets or oil rigs. Reinsurers have no obligation to take on facultative reinsurance, but can assess each risk individually. By contrast, under treaty reinsurance, the reinsurer agrees to assume a certain percentage of entire classes of business, such as various kinds of auto, up to preset limits.
  • FEDERAL RESERVE BOARD
    Seven member board that supervises the banking system by issuing regulations controlling bank holding companies and federal laws over the banking industry. It also controls and oversees the U.S. monetary system and credit supply
  • FIREWALL
    A wall designed to contain or seal off fires in a building.
  • FLOATER
    Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items
  • FLORIDA BUILDING CODE (FBC)
    The FBC provides premium credits for dwellings built with hurricane damage resistant construction methods. (See ROOF COVERING.)
  • FLORIDA INSURANCE GUARANTY ASSOCIATION (FIGA)
    Establishes and maintains a service-oriented operation for processing covered claims of insolvent members.
  • FREQUENCY
    Number of times a loss occurs. One of the criteria used in calculating premium rates.
  • GUARANTEED REPLACEMENT COST COVERAGE
    Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit. (See EXTENDED COVERAGE)
  • HO-3 - HOMEOWNERS 3, SPECIAL FORM
    HO-3 (aka Homeowners 3, Special Form) is the most commonly purchased policy, which is an open perils policy that covers any direct damage to the house or other structures on the property unless it is specifically excluded. However the coverage for personal property is for named perils only—the same perils listed in an HO-2 policy. Covered losses on realty are insured for full replacement value with no depreciation deduction, although certain restrictions apply.
  • HO-6 – UNIT-OWNERS FORM
    The HO-6 (aka Unit-Owners Form) is a modified HO-2 policy specifically designed for owners of condominiums or cooperatives. A condominium or cooperative consists of 2 components for insurance purposes—the building and common areas, and property specific to each unit owner. Thus, this named-perils policy covers certain semi-permanent structures, such as carpeting, wallpaper, built-in appliances, and kitchen cabinets, but it does not cover the structure itself or common areas, since this should be covered by insurance purchased by the condominium association or the cooperative. The policy does provide payment for a loss assessment charge by the condominium association or cooperative that is not covered by the insurance on the realty.
  • HOUSE YEAR
    Equal to 365 days of insured coverage for a single dwelling. It is the standard measurement for homeowners insurance.
  • INCEPTION DATE
    The date on which a policy begins.
  • INCURRED LOSSES
    Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
  • INSOLVENCY
    Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure. (See LIQUIDITY; RISK-BASED CAPITAL)
  • INSURANCE
    A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
  • INSURANCE REGULATORY INFORMATION SYSTEM / IRIS
    Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.
  • INSURANCE-TO-VALUE
    Insurance written in an amount approximating the value of the insured property.
  • INTERNET INSURER
    An insurer that sells exclusively via the Internet.
  • LIABILITY COVERAGE
    Portion of the policy that pays for injuries to another or damage to someone else’s property for which the policyholder is liable.
  • LINE
    Type or kind of insurance, such as personal lines.
  • LLOYD'S OF LONDON
    A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd’s was a London coffee house in the 1600s patronized by ship owners who insured each other’s hulls and cargoes. As Lloyd’s developed, wealthy individuals, called “Names,” placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.
  • LOSS
    A reduction in the quality or value of a property, or a legal liability.
  • LOSS COSTS
    The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
  • LOSS RATIO
    Percentage of each premium dollar an insurer spends on claims.
  • MORTGAGEE
    A lender or creditor, typically a bank, who holds the mortgage, and lends money secured by the value of the mortgaged property.
  • OPENING PROTECTION
    The protection of windows and glass doors from flying debris is one of the most basic and effective means of reducing losses in a windstorm. Class A (Hurricane Impact) – All exterior wall and roof openings in buildings (doors, windows, skylights and vents, other than roof ridge, gable, soffit and plumbing vents) must be fully protected with impact resistant coverings (e.g. shutters), impact resistant doors, and/or impact resistant glazing that meet the requirements of one of the following: SSTD12; ASTM E 1886 and ASTM E 1996(Missile Level C – 9 lb); Miami-Dade PA 201, 202, and 203; or Florida Building Code TAS 201, 202 and 203. 1 to 4 unit buildings only - Class B (Basic Impact) - All exterior wall and roof openings in buildings (doors, windows, skylights and vents, other than roof ridge, gable, soffit and plumbing vents) must be fully protected with impact resistant coverings (e.g. shutters), impact resistant doors, and/or impact resistant glazing that meet the requirements of ASTM E 1886 and ASTM E 1996 (Missile Level B – 4.5 lb). Class C (Ordinary Non-Impact) – All glazed openings (windows, skylights, sliding glass doors, doors with windows, etc) must by protected with shutter devices or wood structural panels that have the following characteristics. Corrugated storm panels made of Steel, Aluminum, or Polycarbonated in which individual panels are no wider than 14” and have a nominal profile of 2” of greater. Roll-Up shutters with aluminum slats. Accordion shutters with aluminum slats. Colonial or Bahama shutters with all the following features: Heavy gauge metal frames Extruded aluminum slats that are anchored to both sides of froma, or solid metal backing plate in place behind slats Structural hinges Mechanism to lock shutters closed during a storm Wood Structural Panels – (One of two story buildings) Plywood or OSB (oriented strand board) with a minimum thickness of 7/16 inches and maximum panel span of 8 feet. Panels must be pre-cut to cover the glazed openings with attachment hardware provided. For locations with design wind speed greater than 130 mph, attachments shall be designed to resist component and cladding loads of the FBC. For locations where design wind speed is 130 mph or less, panels must be fastened according to the Florida Building Code Table 1606.1.4.
  • OTHER STRUCTURES
    Generally detached structures, such as a garage or tool shed, sharing property with the insured dwelling.
  • PERIL
    The cause of a possible loss; for example, fire, theft, or windstorm.
  • POLICYHOLDERS' SURPLUS
    The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.
  • PREMIUM
    The amount of money an insurance company charges for insurance coverage. (See DIRECT PREMIUMS; EARNED PREMIUM)
  • PREMIUMS IN FORCE
    The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.
  • PRIMARY MARKET
    Market for new issue securities where the proceeds go directly to the issuer.
  • PRIOR APPROVAL STATES
    States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.
  • PROPERTY/CASUALTY INSURANCE
    Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.
  • PROTECTION CLASS
    The Public Protection Classification Service was created to gauge the capacity of the local fire department to respond if flames engulf an insured property. A rating of 1-10 is assigned based on information collected and analyzed using the Fire Suppression Rating Schedule. Class 1 represents the best public protection, and Class 10 indicates no recognized protection.
  • RATE REGULATION
    The process by which states monitor insurance companies’ rate changes, done either through prior approval or open competition models. (See OPEN COMPETITION STATES; PRIOR APPROVAL STATES)
  • RATING BUREAU
    The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance Services Office (ISO) which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.
  • RENTERS INSURANCE
    A form of insurance that covers a policyholder’s belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides personal liability coverage for damage the policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-of-use coverage, if a policyholder must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.
  • REPLACEMENT COST COVERAGE
    The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. If you have personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one.
  • RESIDUAL MARKET
    Facilities, such as assigned risk plans and FAIR Plans, that exist to provide coverage for those who cannot get it in the regular market. Insurers doing business in a given state generally must participate in these pools. For this reason the residual market is also known as the shared market.
  • RETROCESSION
    The reinsurance bought by reinsurers to protect their financial stability.
  • RIDER
    An attachment to an insurance policy that alters the policy’s coverage or terms.
  • RISK MANAGEMENT
    Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.
  • ROOF COVERING
    The covering applied to the roof deck for weather resistance, fire classification or appearance Florida Building Code (FBC) Equivalent – Asphalt roof coverings installed in accordance ASTM D 3161 (modified for 110 mph) or Miami Dade County PA 107-95. Non- Florida Building Code (FBC) Equivalent – Asphalt roof shingles not meeting requirements listed above for FBC Equivalent and all other roof covering types. Reinforced Concrete Roof Deck - A roof structure composed of cast-in-place or pre-cast structural concrete designed to be self-supporting and integrally attached to wall/support system.
  • Roof Shape
    Hip - Roof having sloping ends and sloping sides down to the eaves line. Gable - The portion of the roof above the eaves line of a double-sloped roof; the end section appears as an inverted V. Flat - A horizontal roof with a pitch less than 10 degrees.
  • SALVAGE
    Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.
  • SECONDARY WATER RESISTANCE
    The technique used to protect the interior of the building when the roof cover and underlayment blow off during a storm.
  • SINKHOLE
    A special form of earth movement, covered by some homeowner insurance, referring to the sudden collapse or sinking of land into empty, underground spaces eroded by water.
  • SOFT MARKET
    An environment where insurance is plentiful and sold at a lower cost, also known as a buyers’ market. (See PROPERTY/CASUALTY INSURANCE CYCLE)
  • SPREAD OF RISK
    The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. (See ADVERSE SELECTION)
  • SURPLUS LINES
    Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.
  • TITLE INSURANCE
    Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title.
  • TRANSPARENCY
    A term used to explain the way information on financial matters, such as financial reports and actions of companies or markets, are communicated so that they are easily understood and frank.
  • UMBRELLA POLICY
    Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
  • UNDERWRITING
    The process of selection and classification of risk by the degree of insurability
  • VANDALISM
    The malicious and often random destruction or spoilage of another person’s property.
  • WINDSTORM OR HAIL EXCLUSION ENDORSEMENT
    This exclusion removes coverage for wind and hail losses.
  • YEARLY RENEWABLE TERM (YRT) INSURANCE
    One-year term life insurance that is renewable at the end of the policy term. Also known as annually renewable term (ART) insurance. (See TERM LIFE INSURANCE)
  • ACTUAL CASH VALUE
    A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See REPLACEMENT COST)
  • ACTUARY
    An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firm's reserves, determines rates and rating methods, and determines other business and financial risks.
  • ADDITIONAL LIVING EXPENSES
    Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
  • ADJUSTER
    An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
  • ADMITTED ASSETS
    Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See ASSETS).
  • ADVERSE SELECTION
    The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders
  • AFFINITY SALES
    Selling insurance through groups such as professional and business associations.
  • AGENCY COMPANIES
    Companies that market and sell products via independent agents.
  • AGENT
    Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
  • ALEATORY CONTRACT
    A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event. Insurance contracts are aleatory because the policy owner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. Contrast with commutative contract.
  • ALIEN INSURANCE COMPANY
    An insurance company incorporated under the laws of a foreign country, as opposed to a “foreign” insurance company which does business in states outside its own.
  • ALL OTHER PERIL (AOP) DEDUCTIBLE
    Set amount that is applied to all covered losses other than hurricane losses. The second deductible applies only to hurricane losses. Both deductibles apply to Coverage's A, B, C and D.
  • ALLIED LINES
    Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.
  • ALTERNATIVE DISPUTE RESOLUTION/ADR
    An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of and independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
  • ALTERNATIVE MARKETS
    Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and self-insurance, are also included.
  • ANTITRUST LAWS
    Laws that prohibit companies form working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
  • APPRAISAL
    A survey to determine a property’s insurable value, or the amount of loss.
  • ARBITRATION
    Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
  • ARSON
    The deliberate setting of a fire.
  • ASSETS
    Property owned, in this case by the insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companied from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See ADMITTED ASSETS)
  • ASSIGNED RISK PLANS
    Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See RESIDUAL MARKET)
  • ASSIGNMENT
    An agreement under which one party – the assignor – transfers some or all of his ownership rights in a particular property, such as a life insurance policy or an annuity contract, to another party – the assignee.
  • BALANCE SHEET
    Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.
  • BANK HOLDING COMPANY
    A company that owns or controls one or more banks. The Federal Reserve has responsibility for regulating and supervising bank holding company activities, such as approving acquisitions and mergers and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the Comptroller of the Currency or the FDIC.
  • BASIS POINT
    0.01 percent of the yield of a mortgage, bond or note. The smallest measure used.
  • BCEG CLASS
    Building Code Effectiveness Grading. The BCEG scale is a Florida statute designed to evaluate a community's building code and the enforcement of that code. All Florida communities are required to adopt the statute and you may receive a credit based on your community's grade. Each community receives a grade of 1-10, with a 1 being the best. Refer to your policy documents for your community's grade. For questions regarding your community's grade, you should contact your community's Building Department.
  • BENEFICIARY
    The person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs.
  • BINDER
    Temporary authorization of coverage issued prior to the actual insurance policy.
  • BOOK OF BUSINESS
    Total amount of insurance on an insurer’s books at a particular point in time.
  • BROKER
    An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to see variable annuities, which are similar to stock market-based investments.
  • BURGLARY AND THEFT INSURANCE
    Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
  • CAPACITY
    The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.
  • CAPTIVE AGENT
    A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See EXCLUSIVE AGENT)
  • CAPTIVES
    Insurers that are created and wholly owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.
  • CATASTROPHE
    Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million.
  • CATASTROPHE DEDUCTIBLE
    A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.
  • CATASTROPHE FACTOR
    Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.
  • CATASTROPHE MODEL
    Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.
  • CATASTROPHIC GROUND COVER COLLAPSE
    Catastrophic Ground Cover Collapse offers protection if the insured property experiences all of the following: Geological activity that results in the abrupt collapse of the ground cover A depression in the ground cover clearly visible to the naked eye Structural damage to the building, including the foundation The insured structure being condemned and ordered to be vacated by the governmental agency Structural damage consisting merely of the settling or cracking of a foundation, structure or building does not constitute a loss resulting from a catastrophic ground cover collapse.
  • CITIZENS PROPERTY INSURANCE CORPORATION EMERGENCY ASSESSMENT
    Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Emergency Assessment. A broad base of property and casualty policyholders, including Citizens policyholders, is assessed directly by their insurer at renewal. For each of the 3 Citizens accounts, this assessment may not be more than 10 percent of the policy premium or 10 percent of the remaining deficit, whichever is greater. That means that assessable policyholders could be assessed a maximum of 30 percent of assessable premium if there is a deficit in each of the 3 Citizens accounts. The Emergency Assessment can be spread over multiple years, which could reduce the burden on Florida policyholders.
  • CITIZENS PROPERTY INSURANCE CORPORATION REGULAR ASSESSMENT
    Citizens is responsible for paying hurricane and other covered claims to its policyholders. If Citizens funds are depleted after a catastrophic event, resulting in a deficit, assessments are levied according to Florida law. This ability to levy assessments provides Citizens with resources to pay claims after an event. Below is a summary of the Regular Assessment. A broad base of licensed Florida property and casualty insurance companies, including property and automobile insurers are assessed if a deficit remains. These companies are required to remit their share of the Regular Assessment to Citizens within 30 days of the levy and are permitted to recoup this amount by passing it on their policyholders at renewal. Insureds who purchase coverage from surplus lines insurers are also subject to the regular assessment. This assessment can be up to 6 percent per account of assessable premium. That means that assessable insurers, and thus their policyholders, could be assessed a maximum of 18 percent of assessable premium if there is a deficit in all 3 of Citizens' accounts. This assessment is a one-time assessment. Citizens policyholders are not charged this assessment. If the Citizens Policyholder Surcharge and the Regular Assessment do not cure a deficit for any account, the Emergency Assessment is levied.
  • COLLATERAL
    Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. Also called security.
  • COVERAGE
    Synonym for insurance.
  • COVERAGE A
    The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and Materials and supplies located on or next to the "residence premises" used to construct, alter or repair the dwelling or other structures on the "residence premises." This coverage does not apply to land, including land on which the dwelling is located.
  • COVERAGE B
    Other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. This coverage does not apply to land, including land on which the other structures are located.
  • COVERAGE C
    Personal property owned or used by an "insured" while it is anywhere in the world. By will cover personal property owned by: Others while the property is on the part of the "residence premises" occupied by an "insured"; A guest or a "residence employee," while the property is in any residence occupied by an "insured."
  • COVERAGE D
    Coverage D or Loss of Use pays out in the event that you are unable to live in your primary home due to a covered loss.
  • COVERAGE F
    Medical Payments for a set amount of time payable towards injuries sustained by someone that is not the insured or regular resident of the property.
  • CRIME INSURANCE
    Term referring to property coverages for the perils of burglary, theft and robbery.
  • DECLARATIONS
    The first part of the contract, and contains information derived from the insurance application, which provides the information for rating risk. All declarations contain the name of the insured, the insurer, and the property or activity to be insured, the period covered, the policy number, and the amount of the premium. Property insurance also lists the location of the property, and the size of deductible.
  • DEDUCTIBLE
    The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
  • DIRECT PREMIUMS
    Property/casualty premiums collected by the insurer from policyholders, before reinsurance premiums are deducted. Insurers share some direct premiums and the risk involved with their reinsurers.
  • DIRECT WRITERS
    Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, by telephone or via the Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.
  • DOMESTIC INSURANCE COMPANY
    Term used by a state to refer to any company incorporated there.
  • EARNED PREMIUM
    The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires
  • EARTHQUAKE DEDUCTIBLE
    This is the amount your loss must exceed in order for your policy to begin paying for earthquake-related losses.
  • EMERGENCE MANAGEMENT PREPAREDNESS AND ASSISTANCE TRUST FUND
    Established in 1993 by the Florida Legislature, the trust fund is funded by surcharges on certain insurance policies and the money is used to fund emergency management activities at both the state and local level. Each of Florida's 67 counties receives an equal share annually from these funds.
  • ENDORSEMENT
    Amendment to the policy used to add or delete coverage. Sometimes referred to as a Floater or Rider.
  • EQUITY
    In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.
  • ERRORS AND OMISSIONS COVERAGE / E&O
    A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
  • EXCESS AND SURPLUS LINES
    Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) and must be purchased from a non admitted carrier.
  • EXCLUSION
    A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.
  • EXCLUSIVE AGENT
    A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company. (See CAPTIVE AGENT)
  • EXPENSE RATIO
    Percentage of each premium dollar that goes to insurers’ expenses including overhead, marketing and commissions.
  • EXPERIENCE
    Record of losses.
  • EXPOSURE
    Possibility of loss.
  • EXTENDED COVERAGE
    An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
  • FACULTATIVE REINSURANCE
    A reinsurance policy that provides an insurer with coverage for specific individual risks that are unusual or so large that they aren’t covered in the insurance company’s reinsurance treaties. This can include policies for jumbo jets or oil rigs. Reinsurers have no obligation to take on facultative reinsurance, but can assess each risk individually. By contrast, under treaty reinsurance, the reinsurer agrees to assume a certain percentage of entire classes of business, such as various kinds of auto, up to preset limits.
  • FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS
    Insurance pools that sell property insurance to people who can’t buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses. (See RESIDUAL MARKET)
  • FEDERAL RESERVE BOARD
    Seven member board that supervises the banking system by issuing regulations controlling bank holding companies and federal laws over the banking industry. It also controls and oversees the U.S. monetary system and credit supply
  • FIRE INSURANCE
    Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
  • FIREWALL
    A wall designed to contain or seal off fires in a building.
  • FIRST-PARTY COVERAGE
    Coverage for the policyholder’s own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services.
  • FLOATER
    Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items
  • FLOOD INSURANCE
    Coverage for flood damage is available from the federal government under the National Flood Insurance Program but is sold by licensed insurance agents. Flood coverage is excluded under homeowners policies and many commercial property policies. However, flood damage is covered under the comprehensive portion of an auto insurance policy. (See ADVERSE SELECTION)
  • FLORIDA BUILDING CODE (FBC)
    The FBC provides premium credits for dwellings built with hurricane damage resistant construction methods. (See ROOF COVERING.)
  • FLORIDA INSURANCE CATASTROPHE FUND
    Structured as a tax exempt state trust fund under the direction of the State Board of Administration. A nine member advisory council provides the SBA with information and advice.
  • FLORIDA INSURANCE GUARANTY ASSOCIATION (FIGA)
    Establishes and maintains a service-oriented operation for processing covered claims of insolvent members.
  • FRAUD
    Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents and brokers for financial gain.
  • FREQUENCY
    Number of times a loss occurs. One of the criteria used in calculating premium rates.
  • FUTURES
    Agreement to buy a security for a set price at a certain date. Futures contracts usually involve commodities, indexes or financial futures.
  • GUARANTEED REPLACEMENT COST COVERAGE
    Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit. (See EXTENDED COVERAGE)
  • HARD MARKET
    A seller’s market in which insurance is expensive and in short supply. (See PROPERTY/CASUALTY INSURANCE CYCLE)
  • HO-3 - HOMEOWNERS 3, SPECIAL FORM
    HO-3 (aka Homeowners 3, Special Form) is the most commonly purchased policy, which is an open perils policy that covers any direct damage to the house or other structures on the property unless it is specifically excluded. However the coverage for personal property is for named perils only—the same perils listed in an HO-2 policy. Covered losses on realty are insured for full replacement value with no depreciation deduction, although certain restrictions apply.
  • HO-4 –CONTENTS BROAD FORM
    The HO-4 (aka Contents Broad Form) is a modified HO-2 policy for renters of rooms, apartments, or houses. This named-perils policy not only covers personal property, both within the rented dwelling and outside, but also includes liability insurance of at least $100,000 for damage to the property or for injuries to other people in the rented dwelling. Coverage is also provided for any alterations to the structure by the renter, but is limited to 10% of the purchased coverage for personal property.
  • HO-6 – UNIT-OWNERS FORM
    The HO-6 (aka Unit-Owners Form) is a modified HO-2 policy specifically designed for owners of condominiums or cooperatives. A condominium or cooperative consists of 2 components for insurance purposes—the building and common areas, and property specific to each unit owner. Thus, this named-perils policy covers certain semi-permanent structures, such as carpeting, wallpaper, built-in appliances, and kitchen cabinets, but it does not cover the structure itself or common areas, since this should be covered by insurance purchased by the condominium association or the cooperative. The policy does provide payment for a loss assessment charge by the condominium association or cooperative that is not covered by the insurance on the realty.
  • HOMEOWNERS INSURANCE POLICY
    The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy. Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately.
  • HOUSE YEAR
    Equal to 365 days of insured coverage for a single dwelling. It is the standard measurement for homeowners insurance.
  • HURRICANE DEDUCTIBLE
    A percentage or dollar amount added to a homeowner’s insurance policy to limit an insurer’s exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the storm for the deductible to be triggered and the extent of the high risk area, vary from insurer to insurer and state to state.
  • INCEPTION DATE
    The date on which a policy begins.
  • INCURRED BUT NOT REPORTED LOSSES / IBNR
    Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.
  • INCURRED LOSSES
    Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
  • INDEPENDENT AGENT
    Agent who is self-employed, is paid on commission, and represents several insurance companies. (See CAPTIVE AGENT)
  • INSOLVENCY
    Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure. (See LIQUIDITY; RISK-BASED CAPITAL)
  • INSURABLE RISK
    Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.
  • INSURANCE
    A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
  • INSURANCE POOL
    A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes. (See FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS/FAIR PLANS; JOINT UNDERWRITING ASSOCIATION/JUA)
  • INSURANCE REGULATORY INFORMATION SYSTEM / IRIS
    Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.
  • INSURANCE SCORE
    Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race. Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.
  • INSURANCE-TO-VALUE
    Insurance written in an amount approximating the value of the insured property.
  • INSURED
    The policyholder, the person(s) protected in case of a loss or claim.
  • INTERNET INSURER
    An insurer that sells exclusively via the Internet.
  • JOINT UNDERWRITING ASSOCIATION (JUA)
    Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverage's, such as medical malpractice. (See ASSIGNED RISK PLANS, RESIDUAL MARKET)
  • LIABILITY COVERAGE
    Portion of the policy that pays for injuries to another or damage to someone else’s property for which the policyholder is liable.
  • LIMITS
    Maximum amount of insurance that can be paid for a covered loss.
  • LINE
    Type or kind of insurance, such as personal lines.
  • LIQUIDITY
    The ability and speed with which a security can be converted into cash.
  • LLOYD'S OF LONDON
    A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd’s was a London coffee house in the 1600s patronized by ship owners who insured each other’s hulls and cargoes. As Lloyd’s developed, wealthy individuals, called “Names,” placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.
  • LLOYDS
    Corporation formed to market services of a group of underwriters. Does not issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd’s of London, and is found primarily in Texas.
  • LOSS
    A reduction in the quality or value of a property, or a legal liability.
  • 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.
  • LOSS COSTS
    The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
  • LOSS OF USE
    A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
  • LOSS RATIO
    Percentage of each premium dollar an insurer spends on claims.
  • LOSS RESERVES
    The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.
  • MORTGAGEE
    A lender or creditor, typically a bank, who holds the mortgage, and lends money secured by the value of the mortgaged property.
  • OPEN COMPETITION STATES
    States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.
  • OPENING PROTECTION
    The protection of windows and glass doors from flying debris is one of the most basic and effective means of reducing losses in a windstorm. Class A (Hurricane Impact) – All exterior wall and roof openings in buildings (doors, windows, skylights and vents, other than roof ridge, gable, soffit and plumbing vents) must be fully protected with impact resistant coverings (e.g. shutters), impact resistant doors, and/or impact resistant glazing that meet the requirements of one of the following: SSTD12; ASTM E 1886 and ASTM E 1996(Missile Level C – 9 lb); Miami-Dade PA 201, 202, and 203; or Florida Building Code TAS 201, 202 and 203. 1 to 4 unit buildings only - Class B (Basic Impact) - All exterior wall and roof openings in buildings (doors, windows, skylights and vents, other than roof ridge, gable, soffit and plumbing vents) must be fully protected with impact resistant coverings (e.g. shutters), impact resistant doors, and/or impact resistant glazing that meet the requirements of ASTM E 1886 and ASTM E 1996 (Missile Level B – 4.5 lb). Class C (Ordinary Non-Impact) – All glazed openings (windows, skylights, sliding glass doors, doors with windows, etc) must by protected with shutter devices or wood structural panels that have the following characteristics. Corrugated storm panels made of Steel, Aluminum, or Polycarbonated in which individual panels are no wider than 14” and have a nominal profile of 2” of greater. Roll-Up shutters with aluminum slats. Accordion shutters with aluminum slats. Colonial or Bahama shutters with all the following features: Heavy gauge metal frames Extruded aluminum slats that are anchored to both sides of froma, or solid metal backing plate in place behind slats Structural hinges Mechanism to lock shutters closed during a storm Wood Structural Panels – (One of two story buildings) Plywood or OSB (oriented strand board) with a minimum thickness of 7/16 inches and maximum panel span of 8 feet. Panels must be pre-cut to cover the glazed openings with attachment hardware provided. For locations with design wind speed greater than 130 mph, attachments shall be designed to resist component and cladding loads of the FBC. For locations where design wind speed is 130 mph or less, panels must be fastened according to the Florida Building Code Table 1606.1.4.
  • ORDINANCE OR LAW COVERAGE
    Coverage for the additional loss caused by the enforcement of laws that regulate building repair or construction.
  • OTHER STRUCTURES
    Generally detached structures, such as a garage or tool shed, sharing property with the insured dwelling.
  • PACKAGE POLICY
    A single insurance policy that combines several coverage's previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.
  • PERIL
    The cause of a possible loss; for example, fire, theft, or windstorm.
  • POLICY
    A written contract for insurance between an insurance company and policyholder stating details of coverage.
  • POLICYHOLDERS' SURPLUS
    The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.
  • PREMISES
    The particular location of the property or a portion of it as designated in an insurance policy.
  • PREMIUM
    The amount of money an insurance company charges for insurance coverage. (See DIRECT PREMIUMS; EARNED PREMIUM)
  • PREMIUM TAX
    A state tax on premiums paid by its residents and businesses and collected by insurers.
  • PREMIUMS IN FORCE
    The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.
  • PREMIUMS WRITTEN
    The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.
  • PRIMARY MARKET
    Market for new issue securities where the proceeds go directly to the issuer.
  • PRIME RATE
    Interest rate that banks charge to their most creditworthy customers. Banks set this rate according to their cost of funds and market forces.
  • PRIOR APPROVAL STATES
    States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.
  • PROOF OF LOSS
    Documents showing the insurance company that a loss occurred.
  • PROPERTY/CASUALTY INSURANCE
    Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.
  • PROPERTY/CASUALTY INSURANCE CYCLE
    Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.
  • PROTECTION CLASS
    The Public Protection Classification Service was created to gauge the capacity of the local fire department to respond if flames engulf an insured property. A rating of 1-10 is assigned based on information collected and analyzed using the Fire Suppression Rating Schedule. Class 1 represents the best public protection, and Class 10 indicates no recognized protection.
  • RATE
    The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.
  • RATE REGULATION
    The process by which states monitor insurance companies’ rate changes, done either through prior approval or open competition models. (See OPEN COMPETITION STATES; PRIOR APPROVAL STATES)
  • RATING AGENCIES
    Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.
  • RATING BUREAU
    The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance Services Office (ISO) which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.
  • REINSURANCE
    Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid. (see TREATY REINSURANCE, FACULTATIVE REINSURANCE)
  • RENTERS INSURANCE
    A form of insurance that covers a policyholder’s belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides personal liability coverage for damage the policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-of-use coverage, if a policyholder must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.
  • REPLACEMENT COST
    Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
  • REPLACEMENT COST COVERAGE
    The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. If you have personal property replacement cost coverage, your insurance will pay the full cost to repair an item or buy a new one.
  • RESERVES
    A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid.
  • RESIDUAL MARKET
    Facilities, such as assigned risk plans and FAIR Plans, that exist to provide coverage for those who cannot get it in the regular market. Insurers doing business in a given state generally must participate in these pools. For this reason the residual market is also known as the shared market.
  • RETENTION
    The amount of risk retained by an insurance company that is not reinsured.
  • RETROCESSION
    The reinsurance bought by reinsurers to protect their financial stability.
  • RETROSPECTIVE RATING
    A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and minimum limit based on actual loss experience. It is available to large commercial insurance buyers.
  • RIDER
    An attachment to an insurance policy that alters the policy’s coverage or terms.
  • RISK
    The likelihood of a loss.
  • RISK MANAGEMENT
    Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.
  • RISK-BASED CAPITAL
    The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.
  • ROOF COVERING
    The covering applied to the roof deck for weather resistance, fire classification or appearance Florida Building Code (FBC) Equivalent – Asphalt roof coverings installed in accordance ASTM D 3161 (modified for 110 mph) or Miami Dade County PA 107-95. Non- Florida Building Code (FBC) Equivalent – Asphalt roof shingles not meeting requirements listed above for FBC Equivalent and all other roof covering types. Reinforced Concrete Roof Deck - A roof structure composed of cast-in-place or pre-cast structural concrete designed to be self-supporting and integrally attached to wall/support system.
  • Roof Deck Attachments
    The material used to construct roof decks, and the methods used to attach the deck to the roof framing members can influence the likelihood of failure in high winds. •Attachment A – Plywood/OSB roof sheathing attached to roof trusses/rafters by 6 penny nails (2” x 0.131” diameter) or greater which are properly spaced at a maximum of 6” along the edge and 12” in the field on 24” truss/rafter spacing. OR Batten decking or Skipped decking (typically used on roof decks supporting wood shakes or wood shingles). OR Any system of screws, nails, adhesives, other roof deck fastening systems or truss/rafter spacing that has an equivalent mean uplift resistance of 55 pounds per square foot or more as evidenced by laboratory uplift tests on & full size sheets of plywood/OSB. •Attachment B – Plywood/OSB roof sheathing with a minimum thickness of 1/2" attached to roof trusses/rafters by 8 penny (2.5” x 0.131” diameter) nails or greater which are properly spaced at a maximum of 6” along the edge and 12” in the field on 24” truss/rafter spacing. OR Any system of screws, nails, adhesives, other roof deck fastening systems, or truss/rafter spacing that has an equivalent mean uplift resistance of 103 pounds per square foot or more as evidenced by laboratory uplift tests on full size sheets of plywood/OSB. •Attachment C – Plywood/OSB roof sheathing with a minimum thickness of 1/2" attached to roof trusses/rafters by 8d nails (2.5” x 0.131” diameter) which are properly spaced at a maximum of 6” along the edge and 6” in the field on 24” truss/rafter spacing. OR Dimensional Lumber or Tongue & Groove deck roof composed of ¾” thick boards with nominal widths of 4” or more. OR Any system of screws, nails, adhesives, other roof deck fastening systems, or truss/rafter spacing that has an equivalent mean uplift resistance of 182 pounds per square foot or more as evidenced by laboratory uplift tests on full size sheets of plywood/OSB.
  • Roof Shape
    Hip - Roof having sloping ends and sloping sides down to the eaves line. Gable - The portion of the roof above the eaves line of a double-sloped roof; the end section appears as an inverted V. Flat - A horizontal roof with a pitch less than 10 degrees.
  • ROOF-WALL Connection
    Refers to how the roof framing (i.e. trusses) is anchored to the wall to resist the upward force that strong winds can sometimes exert on the roof. Following are the typical types of connections that will require. Toe-Nail – Rafter/truss anchored to top plate of wall using nails driven at an angle through the rafter/truss and attached to the top plate of the wall. Clips – Metal clips installed on each truss/rafter that attach to the side only of the truss/rafter member and to the wall frame. Metal clip should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall. Single Wraps – Metal straps installed on each truss/rafter that wrap over the top of the truss/rafter and attach to the wall frame in one location. Metal strap should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall. Double Wraps – Metal straps installed on each truss/rafter that wrap over the top of the truss/rafter and attach to the wall frame in two locations. Metal strap should be free of severe corrosion, have a minimum of 3 nails into the truss/rafter and 3 nails into the wall at each location.
  • SALVAGE
    Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.
  • SCHEDULE
    A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
  • SECONDARY WATER RESISTANCE
    The technique used to protect the interior of the building when the roof cover and underlayment blow off during a storm.
  • SEVERITY
    Size of a loss. One of the criteria used in calculating premiums rates.
  • SINKHOLE
    A special form of earth movement, covered by some homeowner insurance, referring to the sudden collapse or sinking of land into empty, underground spaces eroded by water.
  • SINKHOLE DEDUCTIBLE
    The sinkhole deductible applies to any loss covered by the Sinkhole Loss Coverage endorsement.
  • SOFT MARKET
    An environment where insurance is plentiful and sold at a lower cost, also known as a buyers’ market. (See PROPERTY/CASUALTY INSURANCE CYCLE)
  • SOLVENCY
    Insurance companies’ ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure. (See SPREAD OF RISK)
  • SPREAD OF RISK
    The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. (See ADVERSE SELECTION)
  • SURPLUS
    The remainder after an insurer’s liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims.
  • SURPLUS LINES
    Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.
  • TERM LIFE INSURANCE
    A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable but premiums increase with age.
  • TITLE INSURANCE
    Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title.
  • TOTAL LOSS
    The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
  • TRANSPARENCY
    A term used to explain the way information on financial matters, such as financial reports and actions of companies or markets, are communicated so that they are easily understood and frank.
  • TREATY REINSURANCE
    A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer’s business.
  • UMBRELLA POLICY
    Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
  • UNDERINSURANCE
    The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.
  • UNDERWRITING
    The process of selection and classification of risk by the degree of insurability
  • UNOCCUPIED
    Property without people occupying or living within it. As opposed to vacant property, unoccupied property may hold furnishings.
  • VANDALISM
    The malicious and often random destruction or spoilage of another person’s property.
  • WIND DEDUCTIBLE
    A separate, higher deductible provision that applies to loss caused by wind or hail. Often, the deductible is expressed as a percentage of the value of the property or, in a homeowners policy, as a percentage of the dwelling limit, rather than as a flat dollar amount. In some Atlantic and Gulf coast states, insurers have filed a variation of this deductible hat applies an even higher percentage deductible in the event of loss from a "named storm," such as a hurricane.
  • WINDSTORM OR HAIL EXCLUSION ENDORSEMENT
    This exclusion removes coverage for wind and hail losses.
  • WRITE
    To insure, underwrite, or accept an application for insurance.
  • YEARLY RENEWABLE TERM (YRT) INSURANCE
    One-year term life insurance that is renewable at the end of the policy term. Also known as annually renewable term (ART) insurance. (See TERM LIFE INSURANCE)
Glossary