A system of measuring insurers’ financial stability
set up by insurance industry regulators. An example is the
Insurance Regulatory Information System (IRIS), which uses
financial ratios to identify insurers in need of regulatory
The part of the total property/casualty policy premium earned
by the insurance company which applies to the expired portion
of the policy period.
Covers a building and its contents, but includes a large percentage
deductible on each. A special policy or endorsement exists
because earthquakes are not covered by standard homeowners
or most business policies.
Total financial loss resulting from the death or disability
of a wage earner, or from the destruction of property. Includes
the loss of earnings, medical expenses, funeral expenses,
the cost of restoring or replacing property, and legal expenses.
It does not include non economic losses, such as pain caused
by an injury.
Electronic Commerce (E-Commerce):
The sale of products such as insurance over the Internet.
A kind of deductible or waiting period usually found in disability
policies. It is counted in days from the beginning of the
illness or injury.
Employee Dishonesty Coverage:
Covers direct losses and damage to businesses resulting from
the dishonest acts of employees. (See Fidelity
Employers’ Liability Insurance:
Provides protection for the employer for those injuries arising
out of and in the course of employment which were not covered
under the workers’ compensation law.
An additional piece of paper, not a part of the original contract,
which cites certain terms and which becomes a legal part of
that insurance contract. Additions to life insurance contracts
are accomplished through the use of riders, which are similar
Environmental Impairment Insurance:
A form of insurance designed to cover losses and liabilities
arising from damages to property by pollution.
Equipment Breakdown Insurance:
See Boiler and Machinery Insurance.
In investments, the ownership interest of shareholders. In
a corporation, stocks as opposed to bonds.
Errors and Omissions Insurance (E&O):
A type of professional liability insurance which indemnifies
insured professionals—who include, but are not limited
to, lawyers, insurance agents and brokers, accountants, real
estate agents, appraisers, abstracters, title insurance agents,
architects and engineers, advertising agents, adjusters, directors
and trustees, fiduciaries, travel agents and data processing
firms—for losses sustained because of their errors
Funds that a lender collects to pay monthly premiums in mortgage
and homeowners insurance, and sometimes to pay property taxes.
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.
Excess of Loss Reinsurance:
A contract between an insurer and a reinsurer, whereby the
insurer agrees to pay a specified portion of a claim and the
reinsurer to pay all or a part of the claim above that amount.
Coverage against losses in excess of a specified dollar limit.
A provision in an insurance policy that eliminates coverage
for certain risks, people, property classes, or locations.
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.)
Part of the social contract that forms the basis for workers
compensation statutes under which employers are responsible
for work-related injury and disease, regardless of whether
is was the employee’s fault and in return the injured
employee gives up the right to sue when the employer’s
negligence causes the harm.
The ratio of a company’s operating expenses to premiums
written. (Expenses include losses and loss adjustment expenses.)
The loss record of an insured or of a particular class of
The date shown on the declarations page of the policy when
coverage will stop. It may be a specific date or a statement
that coverage is continuous until cancelled.
This term in the insurance field may have several meanings:
(1) possibility of loss; (2) a loss potential as measured
by type of construction, area or values; (3) a possibility
of a loss being communicated to an insurance risk from its
surroundings; or (4) a unit of measure of the amount of risk
a company assumes (for example, one car insured for one year).
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.
Extended Coverage Property Insurance:
An extension of the fire insurance policy to protect the insured
against property damage caused by the additional perils of
windstorm, hail, explosion, or riot, civil commotion, aircraft,
vehicle and smoke.
Extended Replacement Cost Coverage:
Pays a certain amount above the policy limit to replace a
damaged home, generally 120% or 125%. Similar to a guaranteed
replacement cost policy, which has no percentage limits. Most
homeowner policy limits track inflation in building costs.
Guaranteed and extended replacement cost policies are designed
to protect the policyholder after a major disaster when the
high demand for building contractors and materials can push
up the normal cost of reconstruction. (See Replacement