Insurance Terms & Definitions - Orange Insurance · Orange Insurance ® LLC 206.774.7867 ......

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InsuranceTerms&DefinitionsABCDEFGHIJKLMNOPQRSTUVWXYZ

BelowaresomestandardtermsanddefinitionsusedwhendescribingBusinessandPersonalInsurancecoverages.Whenreadingthedefinitions,pleasekeepinmindthatthisglossaryisprovidedasaguideonlycuratedfromvarioussources.Thesegeneraldefinitionsareprovidedforeducationalpurposes.Pleaserefertoyourpolicyorcertificateofinsuranceforexactdefinitionsoftermsandcoverageprovisions.Thedefinedtermsandcoverageprovisionsinyourpolicyorcertificateofinsurance,suchas"ReasonableandCustomary",maybedifferentfromthegeneralinformationprovidedbelow,andthepolicyorcertificatelanguagewillprevail.Pleasefurthernotethatdefinitionsandplanoptionsmayvarybystateandplan.

ScrolltotheverybottomfortermsanddefinitionsspecificallyrelatedtoHealth&LifeInsurance.

-A-•A&B:AgentsandBrokers.•A&E:Asbestos&Environmental.•AbsoluteLiability:Liabilityfordamageseventhoughfaultornegligencecannotbeproven.•Accident:Aneventoroccurrencewhichisunforeseenandunintended.•ACLF:AdultCongregantLivingFacility•ActofGod:Aflood,earthquakeorothernonpreventableaccidentresultingfromnaturalcausesthatoccurwithoutanyhumanintervention.•ActivitiesofDailyLiving:Alistofactivities,normallyincludingmobility,dressing,bathing,toileting,transferring,andeatingwhichareusedtoassessdegreeofimpairmentanddetermineeligibilityforsometypesofinsurancebenefits.•ActualCashValue(ACV):1)Thecostofreplacingorrestoringpropertyatpricesprevailingatthetimeandplaceoftheloss,lessdepreciation,howevercaused;2)replacementcostminusdepreciation.•AdditionalInsured(AI):Aperson,companyorentityprotectedbyaninsurancepolicyinadditiontotheinsured.Apersonororganizationnotautomaticallyincludedasaninsuredunderaninsurancepolicy,butforwhominsuredstatusisarranged,usuallybyendorsement.Anamedinsured'simpetusforprovidingadditionalinsuredstatustoothersmaybeadesiretoprotecttheotherpartybecauseofacloserelationshipwiththatparty(e.g.,employeesormembersofaninsuredclub)ortocomplywithacontractualagreementrequiringthenamedinsuredtodoso(e.g.,customersorownersofpropertyleasedbythenamedinsured)•AdditionalInsured(AI)Blanket:Thisincludesunlimitedadditionalinsuredendorsements.•AdditionalInsured(AI)Endorsement:Thisusuallyincludesoneortwoadditionalinsuredendorsements.•AdditionalInsuredOnAPrimaryAndNon-ContributoryBasisClause:It'smosteasilyunderstoodwithanexample;JoeConstructionsubsoutsomeworktoJack'sPlumbing,withJoeConstructionrequestingthiswording.Itmeans,ifJoeConstructionissued,Jack'sPlumbing'spolicycovers...Theypayfirst(primary),andJoeConstruction'spolicydoesn'thavetokickin(non-contributory).Tobreakitdownevenmore,intheexampleofacontractor(orowner)andsub-contractor,ifthecontractor(orowner)requiresthesub-contractortohavethiswordingintheirpolicy,thecontractor(or



owner)willbelessliablefordamagedonetotheproject.Primarywordingmeansthatifacontractor(orowner)ofaprojectispartiallyresponsiblefordamageorinjurythatoccursonaproject,thesub-contractor’spolicywillpayoutFIRST.TheNon-Contributorywordingstatesthatinthesamesituation,thesub-contractor'sinsurancewillbetheonlyinsurancepayingout.•Adjuster:Apersonwhoinvestigatesandsettleslossesforaninsurancecarrier.•Adjusting:Theprocessofinvestigatingandsettlinglosseswithorbyaninsurancecarrier.•AdjustingInjury:WhatisanAdvertisingInjury?...Anadvertisinginjuryisaninjurytoathird-partybroughtaboutbythebusiness'advertisingitsgoodsandservices.Thiscanoccurbycopyrightortrademarkinfringement.Itcanalsooccurasaclaimoflibel,slander,orinvasionofprivacy.Typically,acompetitorofyourbusinesscomplainsthatanact,advertisement,practice,orcommentyouoryourstaffhasmadehasdamagedtheirbusiness.Forexample,incomparingproducts,youradvertisementusesaphotoofyourcompetitor'sproductandmakesafalseclaimaboutthecompetitor'sproduct.Thecompetitorsuesyourbusinessforavarietyofclaims:defamation,trademarkinfringement,etc.Yourcommercialpolicywouldprovideadefenseandindemnityforthiskindofclaim.WhatClaimsareCovered?Yourbusinessisprovidedadvertisinginjurycoveragethroughyourcommercialgeneralliabilitypolicyforclaimssuchas:

• Libel• Slander• InvasionofPrivacy• CopyrightInfringement• TrademarkorTradeDressClaims• CertainStateLawClaims• CertainMisappropriationClaims• UnfairCompetitionClaims(olderpolicies)

Thetypicalcommercialgeneralliabilitydefinesadvertisingas;“Anoticethatisbroadcastorpublishedtothegeneralpublicorspecificmarketsegmentaboutyourgoods,productsorservicesforthepurposeofattractingcustomersorsupporters.”Thecoverageprovidesyourbusinessadefenseandindemnificationfordamagesaslongastheclaimrelatestoabusinessadvertisingreasonandisnotanintentionalnon-advertisingclaim.However,thedefinitionof"advertising"hasbeeninterpreteddifferentlyfromstatetostate.Somecourtsrequiretheactivitytobewiderangingcommunicationtoabroadaudiencewhileothercourtsdefinethesimpleactofbusinesspromotiontobeadvertisingwithoutregardtothesizeoftheaudience.ThereareexclusionsfromcoverageinmoststandardCGLpolicies.Mostoftheexclusionslooktowhethertheactcausingtheclaimwasanintentionalactorknowingviolationofthelaw.Typicalexclusionsfromcoverageinclude:

• KnowinglyPublishingFalseInformation-Coverageismeanttocoverthoseinstanceswhereadvertisingorpromotionunintentionallyincludesfalseormisleadinginformation.

• KnowinglyViolatingtheRightsofAnother-Asanexample:Ifyourbusinessknowsithasnopermissiontouseachild'simageinitsadvertising,anddoessoanyways,coveragewillbeexcluded.

• CriminalActs-Criminalcopyrightandtrademarkinfringement,orothercriminalactsarenotcovered.



• BreachofContractandContractualLiability-Yourbusinesscannotassumeadvertisingliabilityby

contract.Forexample,ifyourbusinessrentsahallaspartofatradeorganization,andyourbusinesssignsaholdharmlessagreementwiththeorganizationandhall,ifavisitorsuesthetradeorganizationorhallandyourbusinessbecomesliableasaresultoftheholdharmlessagreement-thereisnocoverage.

• Price,Quality,andPerformanceClaims-Generallydamagesincurredbecauseoferroneousprice,quality,orperformanceclaimsarenotcovered.Ifowingtoaprintererroryouadvertisea$10,000usedcarfor$1,000,andactuallysellthecarattheadvertisedpriceof$1,000,theinsurerwillnotreimbursetheother$9,000.

Thereareotherexclusionsthatarelesslikelyandyouwillwanttoreviewtheexclusionswithyourinsuranceprofessional.WhatAboutWebsites,BulletinBoards,andForums?First,understandthatcertainbusinessesareexcludedfrommostadvertisinginjurycoverage:

• InternetServiceProviders• WebSiteDesignersandPublishers• AdvertisingCompanies

Thesecompanieswillneedtopurchaseaseparateendorsementtobecoveredcompletely.However,creatingyourowncompanywebsitedoesnotturnyourbusinessintoanadvertisingcompany.Generally,ifyourbusinessdesignsandbuildsawebsitecoverageextendstothepromotionaladvertisingmaterialonthesite.However,thiscoverageisbeinglimitedeachyearasinsurersbegintorecognizetheriskofadvertisingclaimsrelatedtointernetactivities.Today,mostStandardCGLpoliciesexcludecoverageforelectronicforumsorbulletinboardshostedbytheinsured.CGLpoliciesalsonowexcludefromcoverageclaimsrelatedto"spam"ormasselectronicadvertising.Again,thisisanareawhereyouwillwanttospeakwithyourinsuranceprofessional.•Admitted(StandardLines):Standardlineinsurancecompaniesareinsurersthathavereceivedalicenseorauthorizationfromastateforthepurposeofwritingspecifickindsofinsuranceinthatstate,suchasautomobileinsuranceorhomeowners'insurance.Theyaretypicallyreferredtoas"admitted"insurers.Generally,suchaninsurancecompanymustsubmititsratesandpolicyformstothestate'sinsuranceregulatortoreceivehisorherpriorapproval;althoughwhetheraninsurancecompanymustreceivepriorapprovaldependsuponthekindofinsurancebeingwritten.Standardlineinsurancecompaniesusuallychargelowerpremiumsthanexcesslineinsurersandmayselldirectlytoindividualinsureds.Theyareregulatedbystatelaws,whichincluderestrictionsonratesandforms,andwhichaimtoprotectconsumersandthepublicfromunfairorabusivepractices.Theseinsurersalsoarerequiredtocontributetostateguaranteefunds,whichareusedtopayforlossesifaninsurerbecomesinsolvent.•Non-Admitted(E&SorExcess&SurplusLines):Excesslineinsurancecompanies(alsoknownasExcessandSurplus)typicallyinsurerisksnotcoveredbythestandardlinesinsurancemarket,duetoavarietyofreasons(e.g.,newentityoranentitythatdoesnothaveanadequatelosshistory,anentitywithuniqueriskcharacteristics,oranentitythathasalosshistorythatdoesnotfittheunderwritingrequirementsofthestandardlinesinsurancemarket).Theyaretypicallyreferredtoasnon-admittedorunlicensedinsurers.Non-admittedinsurersaregenerallynotlicensedorauthorizedinthestatesinwhichtheywritebusiness,althoughtheymustbelicensedorauthorizedinthestateinwhichtheyaredomiciled.Thesecompanieshavemoreflexibilityandcanreactfasterthanstandardlineinsurancecompaniesbecausetheyarenotrequiredtofileratesandforms.However,theystillhavesubstantialregulatoryrequirementsplaceduponthem.



MoststatesrequirethatExcesslineinsurerssubmitfinancialinformation,articlesofincorporation,alistofofficers,andothergeneralinformation.Theyalsomaynotwriteinsurancethatistypicallyavailableintheadmittedmarket,donotparticipateinstateguaranteefunds(andthereforepolicyholdersdonothaveanyrecoursethroughthesefundsifaninsurerbecomesinsolventandcannotpayclaims),maypayhighertaxes,onlymaywritecoverageforariskifithasbeenrejectedbythreedifferentadmittedinsurers,andonlywhentheinsuranceproducerplacingthebusinesshasasurpluslineslicense.Generally,whenanexcesslineinsurerwritesapolicy,itmust,pursuanttostatelaws,providedisclosuretothepolicyholderthatthepolicyholder'spolicyisbeingwrittenbyanexcesslineinsurer.•AgreedorGuaranteedValue:Agreeduponvalueforproperty.Thenintheeventofatotalcoveredloss,thepolicypaysthatamount–minusanydeductible–guaranteed.•ALS(ActualLossSustained):SomepoliciesarewrittenonanActualLossSustained(ALS)basisforLossofBusinessIncome.IfthereisnolimitshowninthedeclarationsforALS,thisdoesnotmeananunlimitedsourceofpaymentforyourloss.Thelossmuststillbeprovenandtheproofistheamountthatwillbepaid,andusually,itwillnotethatthelimitistomatchsomeotherlimitorreferencetoyourpolicycoverage.•A.M.Best:Issuesfinancial-strengthratingsmeasuringinsurancecompanies'abilitytopayclaims.Italsoratesfinancialinstrumentsissuedbyinsurancecompanies,suchasbonds,notes,andsecuritizationproducts.Best'sFinancialStrengthRatings(FSR)representthecompany'sassessmentofaninsurer'sabilitytomeetitsobligationstopolicyholders.Theratingprocessinvolvesquantitativeandqualitativereviewsofacompany'sbalancesheet,operatingperformanceandbusinessprofile,includingcomparisonstopeersandindustrystandardsandassessmentsofaninsurer'soperatingplans,philosophyandmanagement.Theratingsformulaeareproprietary.Theratingsscaleincludessix"Secure"ratings:

• A++,A+(Superior)• A,A-(Excellent)• B++,B+(Good)

Thescalealsoincludestenratingsforcompaniesdeemed"Vulnerable":

• B,B-(Fair)• C++,C+(Marginal)• C,C-(Weak)• D(Poor)• E(UnderRegulatorySupervision)• F(InLiquidation)• S(RatingSuspended)

TherearemanycompaniesthatA.M.BestfollowsbutdoesnotissueaBest'sCreditRatingon.ThesecompaniesaredesignatedasNotRated(NR).•Amendment:Aformaldocumentchangingtheprovisionsofaninsurancepolicysignedjointlybytheinsurancecompanyofficerandthepolicyholderorhisauthorizedrepresentative.•Annuity:Anyterminatingstreamoffixedpaymentsoveraspecifiedperiodoftime;Anannuityisacontractbetweenyouandaninsurancecompanythatisdesignedtomeetretirementandotherlong-rangegoals,underwhichyoumakealump-sumpaymentorseriesofpayments.Inreturn,theinsureragreestomakeperiodicpaymentstoyoubeginningimmediatelyoratsomefuturedate.



Annuitiestypicallyoffertax-deferredgrowthofearningsandmayincludeadeathbenefitthatwillpayyourbeneficiaryaspecifiedminimumamount,suchasyourtotalpurchasepayments.Whiletaxisdeferredonearningsgrowth,whenwithdrawalsaretakenfromtheannuity,gainsaretaxedatordinaryincomerates,andnotcapitalgainsrates.Ifyouwithdrawyourmoneyearlyfromanannuity,youmaypaysubstantialsurrenderchargestotheinsurancecompany,aswellastaxpenalties.Therearegenerallythreetypesofannuities—fixed,indexed,andvariable.Inafixedannuity,theinsurancecompanyagreestopayyounolessthanaspecifiedrateofinterestduringthetimethatyouraccountisgrowing.Theinsurancecompanyalsoagreesthattheperiodicpaymentswillbeaspecifiedamountperdollarinyouraccount.Theseperiodicpaymentsmaylastforadefiniteperiod,suchas20years,oranindefiniteperiod,suchasyourlifetimeorthelifetimeofyouandyourspouse.Inanindexedannuity,theinsurancecompanycreditsyouwithareturnthatisbasedonchangesinanindex,suchastheS&P500CompositeStockPriceIndex.Indexedannuitycontractsalsoprovidethatthecontractvaluewillbenolessthanaspecifiedminimum,regardlessofindexperformance.Inavariableannuity,youcanchoosetoinvestyourpurchasepaymentsfromamongarangeofdifferentinvestmentoptions,typicallymutualfunds.Therateofreturnonyourpurchasepayments,andtheamountoftheperiodicpaymentsyoueventuallyreceive,willvarydependingontheperformanceoftheinvestmentoptionsyouhaveselected.VariableannuitiesaresecuritiesregulatedbytheSEC.Anindexedannuitymayormaynotbeasecurity;however,mostindexedannuitiesarenotregisteredwiththeSEC.FixedannuitiesarenotsecuritiesandarenotregulatedbytheSEC.•Application:Asignedstatementoffactsmadebyapersonapplyingforinsuranceandthenusedbytheinsurancecompanytodecidewhetherornottoissueapolicy.Theapplicationbecomespartoftheinsurancecontractwhenthepolicyisissued.•Arbitration:Arbitration:Aformofalternativedisputeresolutionwhereanunbiasedpersonorpanelrendersanopinionastoresponsibilityfororextentofaloss.•Arson:Thewillfulandmaliciousburningof,orattempttoburn,anystructureorotherproperty,oftenwithcriminalorfraudulentintent.•Assault&Battery:Assault&BatteryCoverageforthirdpartyliabilityclaimsarisingoutofanyassaultorbattery.Coverageispatrontopatronoremployeetopatron.Assault&Batteryisaveryimportantcoveragetohaveatabar,nightcluborloungeintheeventofafight.•Assets:Allfunds,property,goods,securities,rightsofaction,orresourcesofanykindownedbysomeone.•Assignment:Thelegaltransferofoneperson'sinterestinaninsurancepolicytoanotherperson.•AttachmentBond:(1):Abondgivenbyaplaintiffseekingtoattachthedefendant'spropertythatensurespaymenttothedefendantofanydamagessufferedbecauseoftheattachmentintheeventtheplaintifflosesthesuit.(2):Abondgivenbyadefendantinordertohaveanattachmentreleasedthatensurespaymentofajudgmentawardedtotheplaintiff.(lawyers.com)•Audit:InsuranceCompanyAuditProcedures...Manycommercialinsurancepolicypremiumsareratedonavariablebasissuchaspayroll,grosssales,orcontractcost,andaresubjecttoannualadjustmentfollowingthepolicyexpiration.Thisisthemostequitablemethodofobtainingafairpremiumforexposuretorisk.YourCommercialInsurancePolicyispre-paid.Theinsurancecompanychargesadepositpremium,andthepremiumadjustmentmaybeeitheranadditionalpremiumorarefundforover-estimatingtheratingbasis.Theinsurancecompanywillsendoneoftheiremployeestoreviewyourbookstoobtainthis



information,thoughoccasionallyyouwillreceiveaformtocompleteandreturn.Telephoneauditsarenotasdesirablesincethereisno"papertrail"availabletocorrecterrors.Yourinsurancecompanyisnotallowedtoprovideanyoneelsewithcopiesofyourauditresults,asthisinformationisconsideredconfidential.Thepremiumadjustmentendorsementwillbesenttoyouragent.Besuretoaskmanyquestionsoftheauditorrelatingtospecialpayrolllimitations,officerrestrictions,etc.Itmayresultinpremiumsavings.Inaddition,requestacopyoftheauditor'shandwrittenworksheet.Thismaybeinvaluablewhencheckingtheauditresults.Theauditadjustmentusuallytakesplacebetween30and60daysfollowingexpiration.Yourcopyoftheauditresultswillbemailedwithpremiumadjustmentsaboutfourweeksfollowingtheaudit.•Auto-adjudication:istheprocessofpayingordenyinginsuranceandpublicbenefitclaimsquickly,andwithoutmakingadecisiononeachclaimmanually.Companiesoftenrelyonsoftwaretocheckclaimsforaccuracyandtoadjudicatethoseclaimsinordertoimproveefficiencyinclaimprocessingandtoreducecosts.•AutomobileInsurancePlan:Oneofseveraltypesof"sharedmarket"mechanismswherepersonswhoareunabletoobtainsuchinsuranceinthevoluntarymarketareassignedtoaparticularcompany,usuallyatahigherratethanthevoluntarymarket.Formerlycalled"AssignedRisk."•AutomobileLiabilitySplitLimits:Asplitlimitliabilitycoveragepolicysplitsthecoveragesintopropertydamagecoverageandbodilyinjurycoverage.Thelimitsareoftenexpressedseparatedbyslashesinthefollowingform:"bodilyinjuryperperson"/"bodilyinjuryperaccident"/"propertydamage"…Forexample"$250,000/$500,000/$100,000”wouldbreakdowntomean:

• $250,000forinjuryperperson• $500,000forinjuryperaccident• $100,000fordamagetoproperty

•AutomobileLiabilityInsurance:Protectionfortheinsuredagainstfinanciallossbecauseoflegalliabilityforcar-relatedinjuriestoothersordamagetotheirproperty.•AutomobilePhysicalDamageInsurance:Coveragetopayfordamagetoorlossofaninsuredautomobileresultingfromcollision,fire,theft,orotherperils.•Automobile“Fault”InsuranceState:Alsoknownasa"tortliability"system,Washington(forexample)follows"fault"ruleswhenitcomestotheoptionsofthoseinvolvedincaraccidents.Dependingonthecircumstances,adriver,passenger,orpedestrianwhohasbeeninjuredand/orincurredpropertydamageviaacaraccidentmaychoosetodoanyorallofthefollowing:

• Fileaclaimwithhisorherowninsurancecompany(whetherageneralhealthinsuranceorcarinsurancepolicy)aftertheaccident

• Pursueaclaimtheinsurerofanotherdriverwhomayhavebeenatfaultforcausingtheaccident• Gotocourtandseekmoneydamagesagainsttheat-faultdriverbyfilingapersonalinjury

lawsuit.BecauseWashingtonisa"fault"state,thereareveryfewrestrictionsonyouroptionswhenitcomestogettingcompensationforlossestiedtocaraccidents."No-fault"stateshavemorerestrictions,butprovingfaultinordertogetcompensationisn'trequired.•Automobile“No-Fault”InsuranceState:Ingeneral,No-Faultcoverageeliminatesinjuryliabilityclaimsandlawsuitsinsmalleraccidentsinexchangefordirectpaymentbytheinjuredperson’sinsurancecompanyofmedicalbillsandlostwages--uptocertaindollaramounts--regardlessofwhowasatfaultfortheaccident.



No-Faultoftendoesnotapplyatalltovehicledamage;thoseclaimsarestillhandledbyfilingaliabilityclaimagainsttheonewhoisresponsiblefortheaccident,orbylookingtoyourowncollisioninsurance.AfteryoufileyourPIPclaim,youmayalsobeabletofilealiabilityclaimagainstthepersonatfault.Thecircumstancesunderwhichyoucanfilealiabilityclaimvaryfromstatetostate.•Auto/ValetLiability:Restaurants,nightclubs,barsandloungeshaveveryspecificautorelatedexposures.Whetheryouhireavaletservice,provideyourownorhaveadeliveryservice-theseareimportantfactorstoconsiderwhenreviewingyourinsurance.Makesureyouprotectyourselffromthepotentialproblemsthatcomealongwithautoliability.ProvideyourValetservicecoveragewithAuto/ValetLiabilitytoinsurethebrieftimeyouwillbeutilizingcustomers'cars.-B-•BadFaith:Atermdescribingblatantlyunfairconductthatexceedsmerenegligencebyaninsurancecompany.Forexample,abadfaithclaimmayariseifanautoliabilityinsurerarbitrarilyrefusestosettleaclaimwithinpolicylimits,whereaninsured'sliabilityisincontrovertible.Badfaithdamages,alsoknownasExtracontractualDamages,areoftensubstantial.Theyfrequentlyexceedthelimitsoftheinsurancepolicythatisthesubjectoftheclaim •Bailee:Apersonororganizationtowhichpossessionofthepropertyofothershasbeenentrusted,usuallyforstorage,repair,orservicing.Exceptforpoliciesissuedexpresslyforsuchpurposes,mostpropertypoliciesspecificallyprohibitcoverageforbenefitofabailee.•Benefits:Theamountpayablebytheinsurancecompanytoaclaimant,assigneeorbeneficiaryundereachcoverage.•BI&EE(BIEEorBI/EE):BusinessIncomeandExtraExpense. Commercialpropertyinsurancecoveringlossofincomesufferedbyabusinesswhendamagetoitspremisesbyacoveredcauseoflosscausesaslowdownorsuspensionofitsoperations.Coverageappliestolosssufferedduringthetimerequiredtorepairorreplacethedamagedproperty.Itmayalsobeextendedtoapplytolosssufferedaftercompletionofrepairsforaspecifiednumberofdays.•Binder:Awrittenororalcontractissuedtemporarilytoplaceinsuranceinforcewhenitisnotpossibletoissueanewpolicyorendorsetheexistingpolicyimmediately.Abinderissubjecttothepremiumandallthetermsofthepolicytobeissued.•BindingReceipt:Areceiptgivenforapremiumpaymentaccompanyingtheapplicationforinsurance.Ifthepolicyisapproved,thisbindsthecompanytomakethepolicyeffectivefromthedateofthereceipt.•BlanketAdditionalInsured(Form49-01080711):Anypersonororganizationthatthenamedinsuredisobligatedbyvirtueofawrittencontractoragreement,willbeanadditionalinsuredunderthisblanketform.•BlanketMedicalExpense:Aprovisionwhichentitlestheinsuredpersontocollectuptoamaximumestablishedinthepolicyforallhospitalandmedicalexpensesincurred,withoutanylimitationsonindividualtypesofmedicalexpenses.•BoatOwnersPackagePolicy:Aspecialpackagepolicyforboatownersthatcombinesphysicaldamageinsurance,medicalexpenseinsurance,liabilityinsurance,andothercoverage'sinonecontract.•BoilerandMachineryInsurance:Coverageforlossarisingoutoftheoperationofpressure,mechanical,andelectricalequipment.Itcoverslossoftheboilerandmachineryitself,damagetootherproperty,andbusinessinterruptionlosses.•Bond(Bid):Abondgivenbyabidderforasupplyorconstructioncontracttoguaranteethatthebidder,ifawardedthecontractwithinthetimestipulated,willenterintothecontractandfurnishtheprescribedperformance,paymentand/orotherrequiredbonds.Defaultwillordinarilyresultinliabilitytotheobligeeforthedifferencebetweentheamountoftheprincipal’sbidandthebidofthenextlowbidderwhocanqualifyforthecontract.Inanyevent,however,theliabilityofthesuretyislimitedtothebidbondpenalty.•Bond(Contractor’sLicense):Abondwhichassuresthatacontractor(suchasaplumber,electrician,orgeneralcontractor,forexample)complieswithlocallawsrelatingtohisfield.Licenseandpermitbonds



arerequiredbycertainfederal,state,ormunicipalgovernmentsasprerequisitestoreceivingalicenseorpermittoengageincertainbusinessactivities.ThesebondsfunctionasaguaranteefromaSuretytoagovernmentorstateanditsconstituents(Obligee)thatacompany(Principal)willcomplywithanunderlyingstatute,statelaw,municipalordinance,orregulation–non-compliancewouldconstitutesuchthingsasfailuretopayavendorformaterialsorfailuretopaywagestoemployees.Thisbondisathree-partyagreementbetweenasurety,thecontractorandtheproject/propertyowner.Theagreementbindsthecontractortothetermsandconditionsofacontract.Ifthecontractorhasnotperformedtothecontract'sspecifications,thesuretyassumesthecontractor'sresponsibilitiesandensuresthattheprojectiscompleteduptotheamountofthebond.IfyouarecontractingajobformorethanthisContractor’sLicensebondof$12,000/$6,000(InWashingtonState,forexample),however,youwouldbenefitfromaperformancebond(seebelow).•Bond(License&Permit):Usedinterchangeablywiththeterm“permit-bond”or“license-bond”todescribebondsrequiredbystatelaw,municipalordinanceorregulation,tobefiledpriortothegrantingofalicensetoengageinaparticularbusinessorapermittoexerciseaparticularprivilege.Suchbondsprovidepaymenttotheobligeeor,insomeinstancestothirdparties,forlossordamageresultingfromviolationsbythelicenseeofthedutiesandobligationsimposeduponhimorher.•Bond(Payment):Abondgivenbyacontractortoguaranteepaymenttocertainlaborersandsuppliersforthelaborandmaterialusedintheworkperformedunderthecontract.Thisliabilitymaybecontainedintheperformancebond,inwhichcaseaseparatelaborandmaterialbond(paymentbond)isnotgiven.•Bond(Performance):Abondwhichguaranteesperformanceandcompletionofthetermsofawrittencontract.Performancebondsfrequentlyincorporatepaymentbond(laborandmaterials)andmaintenancebondliability.Aperformancebondisasuretybondthatcoverstheentirecostofaproject,beyondthelegallicensingrequirementof$12,000or$6,000(InWashingtonState,forexample)toguaranteesatisfactorycompletionofaproject.Itisissuedbyasurety/bondingcompany.Paymentfromtheperformancebondisavailableonlytotheproject/propertyowner.Nooneelsecanmakeclaimsagainstit.Ifthecontractorfailstoconstructaccordingtothespecificationsinthecontract,notpayhissub-contractors,etc.,theproject/propertyownerisguaranteedcompensationforanymonetaryloss.Inorderforaperformancebondtobeeffective,thecontractmustbespecificabouttheworktobedone.Acontractorcannotbeheldaccountableforvaguedescriptionsthatareopentointerpretation.•Bond(Subdivision):Abondguaranteeingtoconstructandcompleteimprovementssuchasstreets,sidewalks,curbs,gutters,sewersanddrainage.•Bond(Supply):Abondwhichguaranteesperformanceofacontracttofurnishsuppliesormaterials.Intheeventofadefaultbythesupplier,thesuretymustindemnifythepurchaserofthesuppliesagainstthelossoccasionedthereby.•Bond(Surety):Awrittenagreementprovidingformonetarycompensationtobepaidbythesuretyshouldtherebeafailurebythepersonbondedtoperformspecifiedactswithinastatedperiod.•Bond(Suretyship):Referstoobligationstopaythedebtsof,oranswerfor,thedefaultormiscarriageofanother.Itisalegalrelationshipbaseduponawrittencontractinwhichonepersonorcorporation(thesurety)undertakestoanswertoanother(theobligee)forthedebt,defaultormiscarriageofathirdperson(theprincipal)resultingfromthethirdperson’sfailuretopayorperformasrequiredbyanunderlyingcontract,permit,ordinance,law,ruleorregulation.•BookofBusiness:thenumber,sizeandtypeofaccounts(policyholders)thatanagent"owns."•BOP(BusinessOwner’sPolicy):ABusinessOwner’sPolicyincludes:



• Generalliabilityinsurancetocoveryourcommercialliability,and• Propertyinsuranceforphysicalassets,suchascontents,thatareleasedorowned

ABOPinsurancepackagepolicymightalsocoverthelossofbusinessincomeandextraexpensescausedbyaninsuredperil.Ingeneral,abusinessowner’sinsurancepackagepolicyinsuresdamagedorlostpropertyforitsreplacementvalue.Thatmeansthatintheeventofaclaim,you'llreceivealargeenoughsettlementtoreplacetheproperty,withoutanydeductionfordepreciation.ABOP’spropertyinsurancealsocoversotherpeople'spersonalproperty,ifyouasabusinessownerarelegallyliablefordamagetoit.•BroadForm:BroadFormCoverage;

B–BurglaryDamageI–IceandSnowWeightG–GlassBreakageA–AccidentalDischargeoroverflowofwaterorsteamF–FallingObjectsF–FreezingofPipesE–ElectricalDamageC–CollapseT–TearingAsunder

•Broker:Amarketingspecialistwhorepresentsbuyersofpropertyandliabilityinsuranceandwhodealswitheitheragentsorcompaniesinarrangingforthecoveragerequiredbythecustomer.•Builder'sRiskInsurance:Aspecialtypeofpropertyinsurancewhichindemnifiesagainstdamagetobuildingswhiletheyareunderconstruction.Builder'sRiskInsuranceis"coveragethatprotectsaperson'sororganization'sinsurableinterestinmaterials,fixturesand/orequipmentbeingusedintheconstructionorrenovationofabuildingorstructureshouldthoseitemssustainphysicallossordamagefromacoveredcause.•Burglary:Breakingandenteringintoanotherperson'spropertywithfeloniousintent.•BurglaryandTheftInsurance:Coverageagainstpropertylossesduetoburglary,robbery,orlarceny.•BusinessInsurance:Apolicywhichprimarilyprovidescoverageofbenefitstoabusinessascontrastedtoanindividual.Itisissuedtoindemnifyabusinessforthelossofservicesofakeyemployeeorapartnerwhobecomesdisabled.•BusinessInterruptionInsurance:Protectionforabusinessowneragainstlossesresultingfromatemporaryshutdownbecauseoffireorotherinsuredperil.Theinsuranceprovidesreimbursementforlostnetprofitsandnecessarycontinuingexpenses.AlsoKnownAs“BusinessIncomeandExtraExpense”;insuranceisdesignedtohelpalleviatesomeofthefinancialsufferingrelatedtotheinabilitytoperformnormalbusinessactivitiesduetoacoveredloss.•BuildingOrdinance&LawCoverage:Coverageforlosscausedbyenforcementofordinancesorlawsregulatingconstructionandrepairofdamagedbuildings.Olderstructuresthataredamagedmayneedupgradedelectrical;heating,ventilating,andair-conditioning(HVAC);roofingmaterials;fences;andplumbingunitsbasedoncitycodes.Manycommunitieshaveabuildingordinance(s)requiringthatabuildingthathasbeendamagedtoaspecifiedextent(typically50percent)mustbedemolishedandrebuiltinaccordancewithcurrentbuildingcodesratherthansimplyrepaired.Unendorsed,standardcommercialpropertyinsuranceformsdonotcoverthelossoftheundamagedportionofthebuilding,thecostofdemolishingthatundamagedportionofthebuilding,ortheincreasedcostofrebuildingtheentirestructureinaccordancewithcurrentbuildingcodes.However,coveragefortheselossexposuresiswidelyavailablebyendorsement.Moststandardhomeownerspoliciesincludeaprovisiongrantingalimitedamount(e.g.,10percentofthedwellinglimit)ofbuildingordinancecoverage;thisamountcanusuallybeincreasedbyendorsement.



•Building&PersonalProperty(BPP):Building(s),structuresplusequipment,fixtures,furniture,merchandise,etc.,identifiedinaninsurancepolicyasownedbytheinsuredandusedinhisorherbusiness.•Burglary(TheftPeril):Abreak-in.•BusinessPersonalProperty(Contents):Thingsyouownandcantakewithyou;equipment,fixtures,furniture,merchandise,etc.,identifiedinaninsurancepolicyasownedbytheinsuredandusedinhisorherbusiness.•Buy-SellAgreementLifeInsurance:AlsoknownasaBuyoutAgreement,thisisabindingagreementbetweenco-ownersofabusinessthatgovernswhathappensifaco-ownerdiesorisotherwiseforcedtoleavethebusiness,orchoosestoleavethebusiness.Itmaybethoughtofasasortofpremaritalagreementbetweenbusinesspartners/shareholdersorissometimescalleda"businesswill".Aninsuredbuy–sellagreement,(triggeredbuyoutisfundedwithlifeinsuranceontheparticipatingowner'slives)isoftenrecommendedbybusinesssuccessionspecialistsandfinancialplannerstoensurethebuy–sellarrangementiswell-fundedandtoguaranteetherewillbemoneywhenthebuy–selleventistriggered.ABuy–SellAgreementconsistsofseverallegallybindingclausesinabusinesspartnershiporoperatingagreementoraseparate,freestandingagreement,andcontrolsthefollowingbusinessdecisions:

• Whocanbuyadepartingpartner'sorshareholder'sshareofthebusiness(thismayincludeoutsidersorbelimitedtootherpartners/shareholders);

• Whateventswilltriggerabuyout,(themostcommoneventsthattriggerabuyoutare:death,disability,retirement,oranownerleavingthecompany)and;

• Whatpricewillbepaidforapartner'sorshareholder'sinterestinthepartnershipandsoon.

Buy-SellAgreementcanbeintheformofacross-purchaseplanorarepurchase(entityorstock-redemption)plan.Forgreaterneutralityandeffectivenessofthebuy–sellarrangement,theserviceofacorporatetrusteeisrecommended.

+Asasuccessfulbusinessowner,youhaveworkedhardtoreachyourgoalsanditisprobablethatyourbusinesshasbecomeoneofyourmostvaluableassets.But,haveyouconsideredwhatwouldhappentoyourbusinessandfamilyshouldyouunexpectedlydieorbecomedisabled?

• Doyourheirshaveexperienceoperatingthebusinessonaday-to-daybasis?• Wouldyourheirsbeforcedtosellthebusiness?• Wouldyourheirsreceiveafairprice?• WouldtheIRSseekahighervaluationforyourbusiness?

Thesearedifficultquestionstoanswer.Youoweittoyourselfandyourfamilytoprotectyouryearsofhardwork.Throughproperplanning,youcansecurethecontinuationofyourbusinessandthefinancialsecurityofyourheirs.

HowCanYouProtectYourBusinessandFamily?TheBuy-SellAgreementWhenexaminingdifferentstrategies,itisimportanttoselectonethatinsuresasmoothtransitionofownershipandprotectsyourfamily'sfinancialfuture.Abuy-sellagreementcanhelpyouaccomplishthisgoal.



Abuy-sellagreementisacontractamongbusinessowners.Atthelossofanowner,thebusinessinterestistransferredaccordingtothetermsofthiscontract.Theotherowner(s)areobligatedtopurchasethedeceased'sbusinessinterestandthedeceased'sheirsareobligatedtosell.Justlookatwhatabuy-sellagreementcando.

YourHeirs

• Arefreeofbusinessworriesandguaranteedtoreceiveafairpriceforthesaleofthebusinessinterest.• Mayavoidsomeofthedelaysassociatedwithprobate.

SurvivingOwners

• Willnothavetoworryaboutnewandpossiblyunwantedpartners.• Knowthepurchasepriceofthebusinessbeforehand.• Remainingoodstandingwithclientsandcreditorsthroughasmoothtransitionofownership.Simplyput,a

properlyfundedbuy-sellagreementwillbenefityourfamily,survivingowners,andcreditors.

MethodsofFundingAvailable

Option1:WaitandPayCashInthisoption,survivingowner(s)usecashatthedeathofaco-ownertofundthebuy-sellagreement.But,severaldrawbackstothismethodexist.

• Atdeath,fundsmaynotbereadilyavailableforpayment.• Asavingsplanaccumulatesfundsovertime.Whatiffundsareneededtomorrow?• Willasavingsplanbedepletedtopayforunforeseenexpenses?• Accumulationofcashmaycauseanaccumulatedearningstaxproblem.

Option2:WaitandBorrowFundsInthisoption,survivingowner(s)borrowfunds,usuallybankloans,atthedeathofaco-ownertofundthebuy-sellagreement.But,muchlikethefirstoption,thismethodhasdrawbacks.

• Futuregrowthmaybeslowedduetoanincreaseinexpenses(repaymentofloan).• Deathofanownermaycausesalestodecline,compoundingtheproblem.• Deathofanownermaymakeitdifficulttoreceivealoan.• Asurvivingownermayhavetosignforfunds,exposingpersonalassets.• Survivingownerspaydollarfordollarplusinterestforthedeceased'soutstandingshareofthebusiness.

Option3:Insurance:TheSmartChoicePurchasinginsurancecanbethemostcosteffectivefundingoptionforabuy-sellagreement.Usinginsuranceasafundingvehiclewillprovidethefollowingbenefits:

• Immediateavailabilityofproceedswhendeathordisabilityoccurs.• Thefundsusedtobuythedeceased'ssharearepurchasedforpenniesonthedollar.• Deathbenefitproceedsaregenerallyincometaxfree.• Premiumsmaybesignificantlylowerthanthecostofrepayingtheloaninterest.

TheTypesofBuy-SellPlansAvailable

WhatWillABuy-SellAgreementAccomplish?



• Createsamarketforthestock.• Setsapredeterminedpriceatwhichownersagreetobuyandselltheirshares.• Providesmoneytofundtheplan.

CrossPurchasePlanInthisplan,ownersenterintoanagreementwithoneanother.Tofundthisplan,eachownerappliesfor,owns,andpaysthelifeinsurancepremiumsontheotherowners.

Whenanownerdies:

• Lifeinsuranceproceedsarepaidtothesurvivingowner(s)incometaxfree.• Proceedsareusedtopurchasetheheirs'businessinterest.• Heirsreceiveanagreed-uponpaymentfortheirbusinessinterest.• Survivingowner(s)receiveanincreasedcostbasisfortheacquiredbusinessinterest.

EntityPlanInthisplan,ownersenterintoanagreementwiththebusiness.Thebusinessappliesfor,owns,andpaysthelifeinsurancepremiumsoneachowner.

Whenanownerdies:

• Thebusinesswillreceivethelifeinsuranceproceeds.• Thebusinessusestheproceedstopurchasethedeceased'sbusinessinterest.• Heirsreceiveanagreed-uponpricefortheirbusinessinterest.

StockRedemptionPlanAstockredemptionplanisanagreementbetweenthebusinessanditsshareholders.Thecorporationappliesfor,owns,andpaysthelifeinsurancepremiumsoneachshareholder.

Whenashareholderdies:

• Thecorporationwillreceivethelifeinsuranceproceeds.• Thecorporationwillusetheproceedstopurchasetheshareholder'soutstandingstock.• Heirsreceiveanagreed-uponpricefortheshareholder'soutstandingstock.

WaitandSeePlanThisbuy-sellagreementprovidesanaddedlevelofflexibility,providingtheadvantagesofthecrosspurchaseandentityplans.

• Theownerandthecompanyformanagreement.• Thesurvivingowners/companyhavetheoptiontopurchasethedeceased'sbusinessinterest.• Iftheoptionisnotexercised,theotherpartyisobligatedtopurchasetheinterest.• Fundingtheagreementisusuallytheobligationofthepartywhohasthefirstoption.• Ifnecessary,loansbetweenthetwocanbeusedtohelpapartywhoisunderfunded.

-C-•Cancellations:Thediscontinuanceofaninsurancepolicybeforeitsnormalexpirationdate,eitherbytheinsuredorthecompany.Insurancecontractscanbecanceledformanyreasons,eitherbyyouoryourinsurancecompany.Statelawsgovernwhenandwhyaninsurancecompanycancancelacontractbut



youasthepolicyholderhavetherighttocancelyourpolicyatanytimeforanyreason.Youshouldbefamiliarwiththethreedifferentmethodsofpremiumrefundssoyouarenotsurprisedbythesizeofyourrefundcheck.

• FLATRATE:Youwillreceiveyourentirepremiumasarefundifyourpolicyiscanceledasifitneverexistedinthefirstplace.Somepolicies,suchaslifeinsurance,comewithatrialperiodandcanbecanceledforafullrefundduringthattime.Insurancecompaniescanrescindapolicyforvariousreasonsgovernedbystatelaw.Suretybondscanbeflatcancelledaswelliftheyhaveneverbeenattachedorpostedtoalicense.Flatratecancellationsmeantheinsurancecompanyneveracceptedanyriskunderthepolicyandthereforeearnednoneofyourpremium.

• PRO-RATE/PRO-RATA:Pro-rateorpro-ratacancellationsarethemostcommontypeofpremiumrefund.Youwillreceivearefundofpremiumproportionatetotheamountoftheoriginalpolicyperiodthatremains.Forexample,ifyoupaid$300fora12-monthpolicyanditcancelsafteronlysixmonthsyouwouldreceive$150back.Insuranceratesarecalculatedonadailybasissoapro-ratecancellationwillbeaccuratetotheveryday.

• SHORTRATE:Ashort-ratecancellationmeansyouwillreceiveapro-ratedrefundminusapenalty.Thepenaltyrepresentsanadministrativefeeforcostsincurredbythecompany,andistypically10percentofthepro-ratedamount.Acommonreasonforashort-raterefundiswhenyoucancelyourexistingpolicymidterminordertobuyanewpolicywithadifferentcompany.

•CaptiveInsuranceCompany:Acompanyownedsolelyorinlargepartbyoneormorenon-insuranceentitiesfortheprimarypurposeofprovidinginsurancecoveragetotheownerorowners.•CaptiveInsurer:Insurancecompaniesestablishedandownedbyaparentfirminordertoinsureitslossexposureswhilereducingpremiumcosts,providingeasieraccesstoare-insurer,andperhapseasingtaxburdens.•CargoInsurance:Typeofoceanmarineinsurancethatprotectstheshipperofthegoodsagainstfinanciallossifthegoodsaredamagedorlost.•CasualtyInsurance:Insuranceconcernedwiththeinsider'slegalliabilityforinjuriestoothersordamagetootherpersons'property;alsoencompassessuchformsofinsuranceasplateglass,burglary,robberyandworkers'compensation.•Catastrophe:Eventwhichcausesalossofextraordinarymagnitude,suchasahurricaneortornado.•Causes-of-lossForm:Formaddedtocommercialpropertyinsurancepolicythatindicatesthecausesoflossthatarecovered.Therearefourcauses-of-lossforms:basic,broad,special,andearthquake.Theseareseparateformsprovidingcausesofloss(asubstitutetermforperilsofinsurance)onpropertyriskswrittenontheBuildingandPersonalPropertyFormsandPersonalLinesPropertyForms.

• TheBasicFormincludesthefollowing:fire,lightning,explosion,windstorm/hail,smoke,aircraft/vehicles,riot/civilcommotion,vandalism,sprinklerleakage,sinkholecollapse,andvolcanicaction.

• TheBroadFormincludesallitemsunderBasicFormand,inaddition,includesbreakageofglass,fallingobjects,weightofsnow,iceorsleet,waterdamageandadditionalcoverageofcollapse.

• TheSpecialFormisthe"allrisk"orrisksofphysicallossunlessotherwiseexcludedform.• TheEarthquakeFormcoverstheperilofEarthquake.

•CCIP(Contractor-ControlledInsuranceProgram):AContractor-ControlledInsuranceProgram(CCIP),underwhichthegeneralcontractoristhesponsorandprovidesvariousinsurancecoveragestocontractorsandsubcontractors.Anothertypeofwrap-upisanOwner-ControlledInsuranceProgram(OCIP)isawrap-upunderwhichaprojectownerprovidesvariousinsurancecoveragestocontractorsand



subcontractors.OCIPscompriseabout90%ofthewrap-upprogramscurrentlybeingperformedintheU.S.•CertificateHolder:Anentitywhichisprovidedwithaninsurancecertificateasevidenceoftheinsurancemaintainedbyanotherentity.•CertificateofInsurance:Astatementofcoverageissuedtoanindividualinsuredunderagroupinsurancecontract,outliningtheinsurancebenefitsandprincipalprovisionsapplicabletothemember.•CharteredPropertyandCasualtyUnderwriter(CPCU):ProfessionalwhohasattainedahighdegreeoftechnicalcompetencyinpropertyandliabilityinsuranceandhaspassedtenprofessionalexaminationsadministeredbytheAmericanInstituteforPropertyandLiabilityUnderwriters.•Choiceno-fault:Allowsautoinsuredsthechoiceofremainingunderthetortsystemorchoosingno-faultatareducedpremium.•ConstructionTypes:Frame:Buildingswheretheexteriorwallsarewoodorothercombustiblematerialsincludingconstructionwherecombustiblematerialsarecombinedwithothermaterialssuchasbrickveneer,stoneveneer,woodiron-clad,stuccoonwood.JoistedMasonry:Buildingswheretheexteriorwallsareconstructedofmasonrymaterialssuchasadobe,brick,concretegypsumblock,hollowconcreteblock,stone,tileorsimilarmaterialsandwherethefloorsandroofarecombustible.MasonryNon-Combustible:Buildingswheretheexteriorwallsareconstructedofmasonrymaterialsassuchasadobe,brick,concretegypsumblock,hollowconcreteblock,stone,tileorsimilarmaterials,withthefloorsandroofofmetalorothernon-combustiblematerials.MetalNon-Combustible:Buildingswheretheexteriorwallsandthefloorsandroofareconstructedof,andsupportedbymetal,asbestos,gypsumorothernon-combustiblematerials.FireResistive:BuildingswheretheexteriorwallsandfloorsandroofareconstructedofmasonryorFireResistivematerialshavingafireresistanceratingofnotlessthantwohours.(abacus)•ContingentBusinessIncome:Abusinessthatdependsuponathirdpartytomakeaprofitisreliantoncontingentbusinessincome.Thismeanstheincomedependsuponathirdpartyupholdingitsendofthebusinessrelationship.Thistypeofincomecantakemanyforms,dependinguponthenatureofthebusiness.AnexampleofcontingentbusinessIncomeisanautodealerthatsellsaspecificbrandofcar.Ifthemanufacturerofthatcarisunabletoshiptheproducttothedealer,thedealerwillgooutofbusiness.Anotherexampleisajetmanufacturerthatmakesaspecifictypeofjetforaspecificcustomer.Ifthecustomer,orbuyer,ofthatjetgoesoutofbusiness,themanufacturerwillalsogooutofbusinessifanothercustomerforthatspecialtyitemcannotbeprocured.Evenifoneislaterprocured,themanufacturermayexperienceamajordisruptioninincomeduringtheinterim.Insurancedesignedtocovertheconsequentiallossesiftheplantofasupplieroramajorcustomerisdestroyed,resultingineitherreducedordersorreduceddeliveriesthatforceashutdownoftheinsuredfirm.•ControlledInsuranceProgram(CIP):AControlledInsuranceProgram(CIP),alsoknownasContractor-ControlledInsuranceProgram(CCIP),Owner-ControlledInsuranceProgram(OCIP)orWrap-Up,assuresadequatecoverageisbeingprovidedforaconstructionsite.ThesponsoroftheCIPcanbetheconstructionmanager,generalcontractororowner.UnderaCIP,allenrolledcontractorsorsubcontractorsattheprojectsitereceivegeneralliability,excessand,inmanycases,workers’compensationcoverage.Thesecoveragescanbetailoredtomeettheneedsofaspecificsiteorproject.ACIPcancoverasinglesite,typicallyalargeprojectormultiplesites.•Claim:Arequestforpaymentofalosswhichmaycomeunderthetermsofaninsurancecontract.•ClaimsAdjustor:Personwhosettlesclaims:anagent,companyadjustor,independentadjustor,adjustmentbureau,orpublicadjustor.



•ClaimsMadePolicies:Asthenameindicates,ClaimsMadePoliciesprovidecoverageforclaimsmadeintheperiodthepolicyisinforce.Claimsmadepoliciesprovidecoverageonlysolongastheinsuredcontinuestopaypremiumsfortheinitialpolicyandanysubsequentrenewals.Oncepremiumsstopbeingpaid,andthepolicyends,thenthecoveragestopsforanyclaimsnotknownormadetotheinsurancecompanyduringthecoverageperiod.

Whatthismeanstothebusinessowneristhatthereisariskofanunknownorunreportedclaimbeingmadelongafterthepolicyperiodandnotbeingcoveredbecausetheclaimwasmadeoutsideofthecoverageperiod.

Tocontinuecoverageafterthecoverageperiod,thebusinessownermustpurchase"atail."Tailcoverage(or,theExtendedReportingEndorsement)isanendorsementthatextendstheclaimsreportingperiodafterthepolicyisended.Tailcoveragemustbepurchasedtocontinueanyriskprotectionaffordedunderthepolicy.Tailcoveragecanbeexpensiveandcanprovetobeanunaffordableexpensewhenwindingdown.

Ifyoumovefromoneinsurertothenextwithclaimsmadecoverageyoumustpurchasetailcoverageoryournewinsurermustincludeaprioractsendorsement.Thenewinsurerassumescoveragefortheprioractsoccurringintheothercarrier'scoverageperiod.Aclaims-madepolicyprotectsaninsuredagainstclaimsorincidentsthatarereportedwhilethepolicyisinforce.Normally,aclaims-madepolicyprovidescoverageforactsoccurringpriortotheclaims-madepolicyperiod.Coverageforactsoccurringpriortothepolicyperiodiscalled"prioractscoverage,"andtheperiodpriortothepolicyperiodforwhichclaimsarecoverediscalledtheprioractsperiod.Prioractscoverageisusuallyonlyprovidedwhenaclaims-madepolicyhasbeeninforceimmediatelypriortothecurrentclaims-madepolicyonabasisconsistentwiththepriorpolicy.Prioractscoverageisdefinedas"fullprioracts",coveringactsoccurringatanytimepriortothecurrentpolicyperiod,orisdefinedbya"retroactivedate."Whenaretroactivedateisused,prioractscoverageisprovidedfromtheretroactivedatetothecurrentpolicyperiod.•CLM:InsuranceServicesOffice’s(ISO)commerciallinesmanual.•C.L.U.E(ComprehensiveLossUnderwritingExchange):Insurancecompanieshaveattheirdisposalmultiplereportingtoolstodeterminewhattochargeyouforcarinsuranceorhomeowner’sinsurance.TheseincludeyourC.L.U.E.report,MVR,ormotorvehiclerecord(personaldrivinghistory),vehiclehistoryandfinancialresponsibilityreports.Itisimportanttounderstandwhatisonthesereportstoensureyouaren’tbeingoverchargedforinsurancecoverage.Werecommendgettingonlinequotesasafirststepindeterminingwhetherornotyouhaveasuitableinsurancerate.C.L.U.E.standsfor“comprehensivelossunderwritingexchange.”Insimpleterms,yourC.L.U.E.reportisafivetosevenyearhistoryofpropertydamageclaimsyouhavefiledwithyourinsurancecompany.Therearebasicpiecesofinformationinthereportincludingthedateandtypeofyourloss.Additionally,thefinalamountpaidfortheclaimalongwithgeneralinformationsuchasyourpolicyandclaimnumberandthenameoftheinsurancecompanythatpaidyourclaim.Insurersusethisinformationtohelpcalculatehowmuchtochargeyouforcoverage.Yourinsurancecompanywillchargeyoumoreforcoverageifyouhaveahistoryoffilinginsuranceclaimsandviceversa.ItismuchmorecommonforanautomobileinsurertouseanMVRratherthanaC.L.U.E.report.



Keepinmindthattherearerecordskeptforbothautomobileandpropertyclaims.Thetwoarekeptonseparatereports;soaclaimrelatedtoyourcarinsurancewillnothaveanyeffectonwhatyourinsurerwillchargeyouforhomeowner’sinsurancecoverage.ItisimportanttounderstandthatacompanycannotreportaclaimtoC.L.U.E.ifyouhavenotactuallyfiledtheclaim.Forexample,ifyouweretocallyourinsurerafteranaccidenttoaskquestionsaboutyourdeductible,yourinsurerdoesnothavetherighttoreporttheincident.PertheFairCreditReportingAct,itispossibletoobtainacopyofyourC.L.U.E.reportbycontacting:ChoicePointConsumerDisclosureP.O.Box105108,Atlanta,Georgia30348-5108866-527-2600(tollfree)•Co-Insurance:1)Aprovisionunderwhichaninsuredwhocarrieslessthanthestipulatedpercentageofinsurancetovalue,willreceivealosspaymentthatislimitedtothesameratiowhichtheamountofinsurancebearstotheamountrequired;2)apolicyprovisionfrequentlyfoundinmedicalinsurance,bywhichtheinsuredpersonandtheinsurersharethecoveredlossesunderapolicyinaspecifiedratio,i.e.,80percentbytheinsurerand20percentbytheinsured.•Collision:Thisprovidescoverageintheeventofalossordamagetoaninsuredvehiclecausedbyacollisionoroverturn.•CollisionDeducibleWaiver:ThiscoverageisavailableincertainstatesandonlyifyouhaveUninsuredMotoristCoverage.Withthiscoverage,ifanaccidentwithanuninsuredmotoristcausesdamagetoyourauto,andifyouhavethecorrectdocumentationthattheotherpartyisatfaultanduninsured,youcancollectyourcollisiondeductiblebackfromyourinsurancecompany.However,thiscannotbedoneuntiltherepairstoyourvehiclehavebeencompleted.Eventhoughit'sillegaltodrivewithoutautoinsurancecoverageinmoststates,inevitably,therearedriversouttherewhobelievethey'reabovethelaw.Ifyoushouldhappentobehitbyanuninsureddriver,itwouldn'tbefairforyoutohavetopayforthedamages.That'swhythecollisiondeductiblewaiverisavailable(insomestates)whenyoubuyautoinsurancecoverage.Instateswhereit'savailable,you(maybe)requiredtobuyacollisiondeductiblewaiverinconjunctionwithyourcollisioncoverage.Thecollisiondeductiblewaiverpaysyourcollisiondeductibleifyourinsuredcarisinvolvedinanaccidentinwhichanuninsured(andsometimesafullyinsured)motoristisheldlegallyresponsible.Ifyouhaveahighdeductiblethisisespeciallyhelpful!Uninsured/underinsuredmotoristcoverageisanotherimportanttypeofautoinsurancecoveragetobeawareof.Thereare2typesofuninsured/underinsuredmotoristcoverage:bodilyinjuryandpropertydamage.Bothwillhelpcoveryouincaseofanaccidentwithanuninsuredorunderinsureddriver.Therepercussionsofdrivingwithoutinsuranceshouldfallontheculprit,notthevictim.Withoutacollisiondeductiblewaiver,however,youcouldgetstuckcleaningupaftersomebodyelse'smess.Evenifacollisiondeductiblewaiverisnotmandatoryinyourarea,werecommendyoucoveryourselfwhenyoubuyyouautoinsurancecoverage.Afewextradollarsamonthcansaveyouquiteabitofmoneyifyoueverhavetodealwithanuninsureddriver.Inaperfectworld,everybodywouldcarryautoinsurancecoverage.Sincethisisn'taperfectworld,acollisiondeductiblewaiverisawiseinvestment."WhenwillIgetmydeductiblebackiftheaccidentwasnotmyfault?"Theshortansweris,"Eventually."Eachstatehasdifferentlawsthatdetermineifyourinsurancemustalsocollectyourdeductiblewhiletheycollectwhattheypaidoutforyourdamages.Almosteveryinsurancecompanycollectsyourdeductibleforyouanyway,asacourtesytoyou.Itmighttakeuptoayearormore,though.Thetwofactorswhichaffect



thisthemostare1)Doestheresponsiblepartyhaveinsurance?and2)Doestheresponsibleparty'sinsuranceagreethattheaccidentwastheirfault?Inotherwords,dotheyacceptliabilityfortheaccident?Iftheresponsiblepartyhasinsuranceandtheirinsuranceacceptsliabilityfortheaccident,thenyoushouldhaveyourdeductiblewithinafewweeks.Youcanevencalltheresponsibleparty'sclaimsrepresentativeandaskhertoforwardyourdeductible-eithertoyouortoyourrepairshop.Iftheresponsiblepartyhasinsurance,buttheirinsurancedoesnotagreethattheyareatfaultfortheaccident,thenthedisputedclaimusuallygoestoArbitrationForums.Thisisanorganizationthatinsurancecompaniesjoinvoluntarily.MostinsurancecompaniesintheUSAaremembersofArbitrationForums.Thememberinsurancecompaniesallsendclaimsrepresentatives(panelists)toArbitrationForumsonceamonthtoreaddisputedclaimsandthenmakeliabilitydeterminations.MemberinsurancecompanieshaveallagreedtosticktotheliabilitydeterminationsmadeatArbitrationForums.(Thisagreementonlyappliestopropertydamage,nottoinjuries.)Becausemanyclaimsaredisputed,yourinsurancecompanycollectsasmuchevidenceasitcan,assoonasitcan,onallclaims.Itrecordsyourstatementofhowtheaccidenthappened.Itrequestsrecordedstatementsfromalltheotherdrivers,passengers,andwitnesses.Itgetsphotographsofthedamagetoyourvehicleandanyothervehiclesorpropertyinvolvedintheaccident.Itshouldalsophotographanddiagramthesceneoftheaccident,unlessthisistoodangerous.Meanwhile,theotherinsurancecompaniesaredoingthesame.TheinsurancecompaniesforallthepartiesintheaccidentsendallthisevidencetoArbitrationForumswithcontentionsexplainingwhotheybelievewasthecauseoftheaccident.ArbitrationForumsexaminesallthecontentionsandalltheevidence,andthenArbitrationForumshandsdownaliabilitydecisionwhichalltheinsurancecompaniesmustfollow(withrespecttothepropertydamageonly).Themorepartiesareinvolvedinthedisputedclaim,thelongerthistendstotake.Ifthisisyourscenario,thenyouarelookingatwaitingthreetosixmonthsbeforeyougetyourdeductibleback.Iftheresponsiblepartydoesnothaveinsurance,thenyourinsurancecompanywillcontactthemdirectlyanddemandrepayment.Ifyoudonothaveanyprovisionforyourdeductibletobewaived,thenyoumaybewaitinguptoayearormoretogetyourdeductibleback,inthissituationespecially.•CollisionInsurance:Protectionagainstlossresultingfromanydamagetothepolicyholder'scarcausedbycollisionwithanothervehicleorobject,orbyupsetoftheinsuredcar,whetheritwastheinsured'sfaultornot.Collisioncoveragepaysfordamagetoyourvehiclecausedbyanyaccidentalimpactwithanothervehicleorobject,andincludesifyourvehicleoverturns.Themaximumamountyou'dreceiveundercollisioncoverageistheactualcashvalueofyourvehicleminusthedeductibleyouchoseforthiscoverage.•CombinedRatio:Basically,ameasureoftherelationshipbetweendollarsspentforclaimsandexpensesandpremiumdollarstakenin;morespecifically,thesumoftheratiooflossesincurredtopremiumsearnedandtheratioofcommissionsandexpensesincurredtopremiumswritten.Aratioabove100meansthatforeverypremiumdollartakenin,morethanadollarwentforlosses,expenses,andcommissions.•CombinedSingleLimit:CombinedSingleLimit(CSL)insurancereferstoBodilyInjury(BI)andPropertyDamage(PD)coveragecombinedinonesinglepolicy.Sinceitisonesingleunitofcoverage,itcanusedtowardseithercoveringmedicalexpensesorpayingforrepairbills.CSLisalsoreferredtoas“singlelimitinsurance”,asopposedtothe“splitlimit”system.Withasinglelimitpolicytheinsurerwillpayforanyexpenseuptoacertainamount,whilewithsplitlimitcoveragetheamountissplitinthreecategories,eachwithitsownlimit.



E.g.:A$200,000singlelimitpolicycouldbeused,forinstance,with$180,000inmedicalexpensesand$20,000inpropertydamage.Witha$75/150/50splitpolicyyouarelimitedto$75,000inmedicalexpensesperpassenger,butnotmorethan$150,000peraccident,and$50,000inpropertydamage.CSLpoliciesaregenerallymoreexpensive.•CommercialAutoSymbols/Designations:Mostcommercialautopolicies,includingthestandardISOautopolicy,useasetofnumericsymbolstodesignatethetypesofautosthatarecoveredbyyourpolicy.Thesesymbolsarecalledcoveredautodesignationsymbols.Theyconsistofthenumbers1through9,aswellas19.Eachnumericsymbolrepresentsacategoryofautos,suchas"ownedautos"or"hiredautos."Symbol1Ofthetensymbolsusedinacommercialautopolicy,symbol“1”affordsyou(thenamedinsured)thebroadestcoverage.Symbol1designatesanyauto.Anyautoincludesautosyouown;autosyouhire,rent,leaseorborrow;andautosyoudon'town(non-ownedautos).Symbol“1”isusedtotriggerliabilityinsuranceonly.Itcannotbeusedtoinitiateanyothercoverage.Supposethatyourcommercialautopolicyshowssymbol1(anyauto)forliabilitycoverage.Imaginethatyouarethesoleownerofaconsultingbusiness.Yourcompanyisacorporation,andbothyou(JackJones)andyourbusiness(JonesInc.)arenamedinsuredsonyourcommercialautopolicy.Onedayyouaredrivingavehicleownedbyyourcompanywhenyouinadvertentlyrear-endanothervehicle.Thedriverofthatvehicleisinjuredandsuesyou(JackJones)forbodilyinjury.Areyoucoveredforthesuitunderyourpolicy?Foranautoaccidenttobecoveredunderyourautopolicy,theaccidentorlossmustoccurduringthepolicyperiodandinthecoverageterritory.(Inthescenariospresentedinthisarticle,we'llassumetheseconditionshavebeensatisfied.)Inaddition,forliabilitycoveragetoapply:

1. Thepartyliablefortheaccidentmustqualifyasaninsured;and2. Theautothatcausedtheaccidentmustbeacoveredauto

Underthestandardcommercialautopolicy,you(thenamedinsured)areaninsuredforanycoveredauto.Symbol1designatesanyauto.Atthetimeoftheaccidentyou(JackJones)weredrivinganownedauto.Anyautoincludesownedautos.Becauseyouareaninsured,andyouweredrivingacoveredautowhentheaccidentoccurred,thesuitagainstyouiscovered.NowsupposethatSteve,oneofyouremployees,isrunninganerrandforyourcompanyinhispersonalvehiclewhenheaccidentallysideswipesanotherauto.Thedriveroftheothervehicleisinjuredintheaccidentandsuesbothyourcompany(JonesInc.)andStevefornegligence.Symbol1appearsnexttoliabilitycoverageinthecommercialautodeclarations.Asthenamedinsured,JonesInc.isaninsuredforaccidentsinvolvinganycoveredauto.Steve'svehicleisconsideredanon-ownedautosinceitisnotownedbyyouoryourcompany.Anyautoincludesanon-ownedauto.Thus,thevehicleisacoveredauto,andthesuitagainstJonesInc.iscovered.Unfortunately,Steveisnotaninsured.Employeesareinsuredsunderacommercialautopolicyonlywhiledrivingvehiclesyouown,hireorborrow.Atthetimeoftheaccident,Stevewasdrivinganon-ownedvehicle.Thus,theclaimagainsthimisnotcovered.Symbols2,3and4Thenextthreesymbolsdesignateownedautos.Symbol2triggerscoverageforallautosyouown,includingprivatepassengertypeautosandcommercialvehicles(trucksetc.).Symbol3designatesprivatepassengerautosonlywhilesymbol4triggerscoverageforcommercialvehiclesonly.Symbols2,3and4affordautomaticcoverageforautosyouacquireduringthepolicyperiod.Symbols2



and4automaticallyaffordliabilitycoverageforanytraileryoudon'townthatisattachedtoacarortruckthatyoudoown.Symbols5and6Thesesymbolsapplyonlytospecificcoverages.Symbol5isusedonlytoprovideno-faultcoverageforautosyouown,whensuchcoverageisrequiredbylaw.Symbol6isusedtotriggeruninsuredmotoristcoverageforautosyouown.Thissymbolisusedonlywhenyouarerequiredbylawtopurchase,andcannotreject,UMcoverage.Symbol7Thissymbolisthemostrestrictive.Itcoversonlyforthosevehiclesthataredescribedinthedeclarations.Thatis,whensymbol7islistedforliability,nocoverageisaffordedforanyvehiclethatisnotscheduledonthepolicy.Moreover,anyvehicleyouacquireafterthepolicyinceptiondateiscoveredonlyforthosecoveragesthatareincludedonallautosyouown.Forexample,supposethatyouowntwoautos,bothofwhicharecoveredforliabilityandcomprehensivecoverages.Youacquireanewautoduringthepolicyperiod.Becausealloftheautosyouownarecurrentlycoveredforliabilityandcomprehensivecoverage,yournewautowillbeinsuredforthosecoveragesaswell.Thesecoverageswillapplyforamaximumofthirtydaysunlessyounotifyyourinsurerwithinthatthirty-dayperiodandasktohavetheautoaddedtoyourpolicy.Anewautowillalsobecoveredforuptothirtydaysifitreplacesanautoyoupreviouslyowned.Inthiscase,thenewautowillbecoveredforthesamecoveragesthatwereincludedonthepreviousvehicle.Youmustnotifytheinsurerwithin30daysoftheacquisition.TheuseofSymbol7shouldbeavoided.However,thissymbolmaybeappropriateinrarecircumstances.Forinstance,supposeyouowntwopickuptrucksthatyouleasetoanothercompany.Thepickupsareinsuredunderthelessee'sautopolicy.Youownathirdvehiclethatyouinsureunderyourownpolicy.YourpolicyincludesSymbol7forliabilityinordertoavoidprovidingduplicatecoverageforthepickups.Symbol8Thissymboldesignateshiredautos.Hiredautosincludevehiclesyouhire,rent,leaseorborrow.Symbol8doesnotcoveranyvehicleyouhire,rent,leaseorborrowfromanyofyouremployees,partnersormembers(ifyouarealimitedliabilitycompany)oranymembersoftheirhouseholds.Symbol8maybeusedforliabilityorphysicaldamagecoverage.Symbol9isusedtocovernon-ownedautos.Non-ownedautosarevehiclesyouuseinyourbusinessbutdonotown,hire,rent,leaseorborrow.Examplesarevehiclesusedinyourbusinessthatareownedbyyouremployeesorpartners.Symbol19designatesmobileequipmentthatissubjecttoacompulsoryorfinancialresponsibilitylaw.Thissymbolisrarelyused.Underacommercialautopolicy,mobileequipment(suchasabulldozerorforklift)thatyouarerequiredbylawtoinsuredforliabilityisconsideredanautowhileitisbeingdrivenonapublicroad.(Whenparkedorusedatajobsite,thevehicleisconsideredmobileequipment.)Thus,itcanbecoveredviaanysymbolthattriggerscoverageforcommercialautosyouown.Examplesaresymbols2and4.Symbol19maybeusedifyouacquiremobileequipmentduringthepolicyperiodthatrequiresliabilityinsurance,andnoneoftheexistingsymbolsareappropriate.Forexample,supposethatyoupurchaseacommercialautopolicythatcoversonlyhiredandnon-ownedautos.Twomonthsafteryourpolicybeginsyoubuyaforkliftthatyouarerequiredbylawtoinsureforliability.Symbols8and9donotcoverownedautos.Thus,symbol19canbeaddedtoyourpolicytotriggerliabilitycoverageforyourforkliftwhenthevehicleisdrivenonapublicroad.[definitionfromabout.com]



•CommercialAuto(Trucking):Whatarethedefinitionsofcommon,contract,andbrokerauthoritiesandfreightforwarders?

• Commoncarriersprovidefor-hiretrucktransportationtothegeneralpublic.Commoncarriersmustfilebodilyinjuryandpropertydamage(BI&PD)liabilityinsurancebutarenotrequiredtofilecargoinsurance

• Contractcarriersprovidefor-hiretrucktransportationtospecific,individualshippersbasedoncontracts.Carriersmustfileliability(BI&PD)insurancebutarenotrequiredtofilecargoinsurance

• Bothcommonandcontractmotorcarriersofhouseholdgoodsarerequiredtofileliability(BI&PD)insuranceandcargoinsurance

• Abrokerisapersonoranentitywhicharrangesforthetransportationofpropertybyamotorcarrierforcompensation.Abrokerdoesnottransportthepropertyanddoesnotassumeresponsibilityfortheproperty

• Afreightforwarderisapersonorentitywhichholdsitselfouttothegeneralpublictoprovidetransportationofpropertyforcompensationandintheordinarycourseofitsbusiness:

o Assemblesandconsolidates,orprovidesforassemblingandconsolidating,shipmentsandperformsbreak-bulkanddistributionoperationsoftheshipments

o Assumesresponsibilityforthetransportationfromtheplaceofreceipttotheplaceofdestination

o Usesforanypartofthetransportationarail,motororwatercarriersubjecttothejurisdictionofeitherFMCSAortheSurfaceTransportationBoard

•CommercialGeneralLiabilityPolicy(CGL):Abroadcommercialpolicythatcoversallliabilityexposuresofabusinessthatarenotspecificallyexcluded.Acommercialliabilitypolicycanbedraftedtocontainoneoftwoclaimforms;occurrenceorclaims-made.Forexample;A“1,000,000(a)/2,000,000(b)/1,000,000(c)"CGLpolicyendsupwiththisascoverage:PerOccurrenceorClaim:$1,000,000(a)Aggregate(totalannualmaximumforthepolicy):$2,000,000(b)Products/CompletedOperations:$1,000,000(c)Personal/AdvertisingInjury:$1,000,000(a)PropertyDamage:$1,000,000(a)BodilyInjury:$1,000,000(a)FireLegal:$50,000(thisisprettystandardbutcanchangefrompolicytopolicy)MedPay:$5,000(thisisprettystandardbutcanchangefrompolicytopolicy)Deductible:$1,000(thisisprettystandardbutcanchangefrompolicytopolicy)

ACommercialLiabilityinsurancepolicyprovidesinsuranceprotectiontopayforbodilyinjuryorpropertydamageswhentheinsuredislegallyresponsible.

• Thepolicyprovidescoverageforliabilityarisingfrompersonalinjuryandadvertisinginjury.• Coverageformedicalexpenseisalsoprovided.Thispaysmedicalexpensesresultingfrombodily

injurycausedbyanaccidentonpremisesownedorrentedbytheinsuredparty,orlocationsnexttosuchproperty,orwhencausedbytheinsured'soperations.

• Thepolicyalsocoversaccidentsoccurringonthepremisesorawayfromthepremises.• Liabilitycoverageisprovidedforinjuryordamagesarisingoutofgoodsorproductsmadeorsold

bytheinsured.• Inadditiontothelimits,thepolicyprovidessupplementalpaymentsforattorneyfees,court

costsandotherexpensesassociatedwithaclaimorthedefenseofaliabilitysuit.



• Therearetwocommercialgeneralliabilitycoverageforms,theoccurrenceformandtheclaims-

madeform.Thedifferencebetweenthemliesinthewayclaimsarehandledunderthetwoforms.Whiletheoccurrenceformcoversbodilyinjuryorpropertydamageclaimsthatoccurduringthepolicyterm,theclaims-madepolicyformonlycoversclaimsmadeagainsttheinsuredduringthepolicyterm.

• Thefiredamagelimitprovidesliabilitycoverageforfiredamagecausedbynegligenceonthepartoftheinsuredtorentedpremises.Ifafireoccursbecauseofnegligenceanddamagespropertynotrentedtotheinsured,coverageisprovidedundertheoccurrencelimit.

• Coverageisalsoprovidedforinjuryresultingfromoffensessuchasfalsearrest,maliciousprosecution,detentionorimprisonment,actsofinvasion,orrightsofprivateoccupancyofaroom.

• Liabilitycoverageforlibelandslanderisalsoprovidedinthepolicy.Thiscoveragepaysfordamagesdoneinthecourseoforalorwrittenadvertisementthatdisparages,libelsorslandersaperson'sororganization'sgoods,productsorservices.

•CommercialLines:Insuranceforbusinesses,organizations,institutions,governmentalagencies,andothercommercialestablishments.•CommercialPropertyInsurance:PropertyInsuranceisanytypeofcommercialinsurancethatreimbursesaninsuredpartywhohassufferedafinanciallossbecausepropertyhasbeendamagedordestroyed.

• Propertyisconsideredtobeanyitemthathasvalueandcanbeclassifiedasrealpropertyorpersonalproperty.Realpropertyislandandtheattachmentstoit,suchasbuildings.PersonalPropertyisallpropertythatisnotrealproperty.

• TheBuildingandPersonalPropertycoverageformisusedtoinsurealmostalltypesofcommercialproperty.

• TheinsuringagreementintheBuildingandPersonalPropertycoverageformpromisestopayfordirectphysicallossordamagetocoveredpropertyatthepremisesasdescribedinthepolicyundercoveredcauseofloss.

• Coverageforthebuildingincludesthebuildingandstructures,completedadditionstocoveredbuildings,outdoorfixtures,permanentlyinstalledfixtures,machineryandequipment.Thebuildingmaterialusedtomaintainandservicethepremisesisalsoinsured.

• BusinessPersonalPropertyownedbytheinsuredpartyandusedinbusinessiscoveredfordirectlossordamage.Thistypeofcommercialinsurancepolicyisalsointendedtoprotectagainstlossordamagetothepersonalpropertyofotherswhileintheinsuredparty'scare.

• Basicpropertyinsurancepoliciesarewrittentocoverfire,lightning,explosion,windstorm,hail,smoke,aircraftorvehicledamage,riotorcivilcommotion,vandalism,sprinklerleakage,sinkholecollapseandvolcanicaction.

• Otherpropertyinsurancepoliciesaddcoverageforwaterdamage,weightofsnow,iceorsleet,breakageofglassandcoverageforfallingobjects.

• Mostcommercialinsurancecompaniesusetwoapproachestodeterminevalueofaproperty:1. Thereplacementcostofapropertyisthecosttoreplaceitwithnewproperty.2. Actualcashvalue(ACV)isreplacementcost,minustheaccumulateddepreciationfor

ageandcondition.

•CommercialUmbrellaorExcessInsurance:The(commercial)umbrellapolicyservesthreepurposes:itprovidesexcesslimitswhenthelimitsofunderlyingliabilitypoliciesareexhaustedbythepaymentofclaims;itdropsdownandpicksupwheretheunderlyingpolicyleavesoffwhentheaggregatelimitoftheunderlyingpolicyinquestionisexhaustedbythepaymentofclaims(IRMI)



•CommunityProperty:Aspecialownershipformrequiringthatonehalfofallpropertyearnedbyahusbandorwifeduringmarriagebelongstoeach.Communitypropertylawsdonotgenerallyapplytopropertyacquiredbygift,bywill,orbydescent.•ComparativeNegligence:Underthisconceptaplaintiff(thepersonbringingsuit)mayrecoverdamageseventhoughguiltyofsomenegligence.Hisorherrecovery,however,isreducedbytheamountorpercentofthatnegligence.•CompletedOperations:Liabilityarisingoutoffaultyworkperformedawayfromthepremisesaftertheworkoroperationsarecompleted.Applicabletocontractors,plumbers,electricians,repairshops,andsimilarfirms.•ComprehensiveAutomobileInsurance:Protectionagainstlossresultingfromdamagetotheinsuredauto,otherthanlossbycollision.Thismayincludedamagesduetofire,theft,vandalism,windstormorcontactwithananimal.•ComprehensivePersonalLiabilityInsurance:Protectionagainstlossarisingoutoflegalliabilitytopaymoneyfordamageorinjurytoothersforwhichtheinsuredisresponsible.Itdoesnotincludeautomobileorbusinessoperationliabilities.•CompulsoryAutoLiabilityInsurance:Insurancelawsinsomestatesrequiredmotoriststocarryatleastcertainminimumautocoverage’s.Thisiscalled"compulsory"insurance.•CompulsoryInsuranceLaw:Lawprotectingaccidentvictimsagainstirresponsiblemotoristsbyrequiringownersandoperatorsofautomobilestocarrycertainamountsofliabilityinsuranceinordertolicensethevehicleanddrivelegallywithinthestate.•Concealment:Deliberatefailureofanapplicantforinsurancetorevealamaterialfacttotheinsurer.•ConcurrentCausation:Legaldoctrinethatstateswhenapropertylossisduetotwocauses,onethatisexcludedandonethatiscovered,thepolicyprovidescoverage.•Conditions:Provisionsinsertedinaninsurancecontractthatqualifyorplacelimitationsontheinsurer'spromisetoperform.•Consideration:Oneoftheelementsforabindingcontract.Considerationisacceptancebytheinsurancecompanyofthepaymentofthepremiumandthestatementmadebytheprospectivepolicyholderintheapplication.•ConsequentialLoss:Financiallossoccurringastheconsequenceofsomeotherloss.Oftencalledanindirectloss.•ContaminatedProductsRecallInsurance: Typically,productliabilityinsurancewillcoveronlythird-partyclaims.Thismeansclaimsfromthoseoutsideofthebusinessclaimingtohavebeeninjuredbytheproduct.But,massiveproductrecallsinvolveexpensesbeyondpotentialclaimssuchaslossofrevenue,businessinterruption,andcostsassociatedwiththerecall.Thosecostsaregenerallynotcoveredinatraditionalproductliabilitypolicy.Contaminatedproductsinsuranceisatypeofbusinessinsurancecoveragethatfillsthegap.Thecoverageisdesignedtocoverthosecostsassociatedwithcontaminatedproductrecalls.Someinsurersalsoofferdisastercontainmentconsultingservicesasapartofthecoverageandcoveragedesignedtorestoretheproducttoasafecondition.Contaminatedproductscoverageissomethingtoconsiderforyourcompanyifitwillbeinvolvedinthefood,medicine,orrestaurantbusinessatanylevelofthesupplychain.“ProductRecallCoverage”isaspecialtycoveragepurchasedbymanufacturers.Thescopeofcoveragevaries.Mostpoliciescoverthecostofrecallingtheproduct.Othersalsoincludecrisismanagementand/orextortion.•ContingentLiability:Liabilityarisingoutofworkdonebyindependentcontractorsforafirm.Afirmmaybeliablefortheworkdonebyanindependentcontractoriftheactivityisillegal,thesituationdoesnotpermitdelegationofauthority,ortheworkisinherentlydangerous.•Contract:Abindingagreementbetweentwoormorepartiesforthedoingornotdoingofcertainthings.Acontractofinsuranceisembodiedinawrittendocumentcalledthepolicy.



•ContractorsPollutionLiability(CPL):Acontractor-basedpolicy,offeredonaclaims-madeoroccurrencebasis,thatprovidesthird-partycoverageforbodilyinjury,propertydamage,defense,andcleanupasaresultofpollutionconditions(sudden/accidentalandgradual)arisingfromcontractingoperationsperformedbyoronbehalfofthecontractor.•ContributoryNegligence:Negligenceofthedamagedpersonthathelpedtocausetheaccident.Somestatesbarrecoverytotheplaintiffiftheplaintiffwascontributorynegligenttoanyextent.Othersapplycomparativenegligence.•Coverage:Thescopeofprotectionprovidedunderacontractofinsurance;anyofseveralriskscoveredbyapolicy.•CoverageLetter:Acoverageletterisacarrier’swrittenresponsetoaninsured'sfirstnoticeofclaimunderapolicy.Itgenerallysetsforththecarrier'spositiononcoveragefortheclaimthathasbeentenderedundertheapplicable(orpotentiallyapplicable)policy.•Covered:Apersoncoveredbyapensionplanisonewhohasfulfilledtheeligibilityrequirementsintheplan,forwhombenefitshaveaccrued,orareaccruing,orwhoisreceivingbenefitsundertheplan.•Coverholder(Lloyd’sofLondon):Acoverholderisacompanyorpartnershipauthorisedbyamanagingagenttoenterintoacontractorcontractsofinsurancetobeunderwrittenbythemembersofasyndicatemanagedbyitinaccordancewiththetermsofabindingauthority.CoverholdersallowLloyd’ssyndicatestooperateinaregionorcountryasiftheywerealocalinsurer.ThisisachievedbyLloyd’ssyndicatesdelegatingtheirunderwritingauthoritytocoverholders.AcoverholdercanhavefullorlimitedauthoritytounderwriteonbehalfofaLloyd’ssyndicate.Itwillusuallyissuetheinsurancedocumentationandwilloftenhandleclaims.Thedocumentsettingoutthetermsofthecoverholder’sdelegatedauthorityisknownasabindingauthority.•CreditInsurance:Aguaranteetomanufacturers,wholesalers,andserviceorganizationsthattheywillbepaidforgoodsshippedorservicesrendered.Appliestothatpartofworkingcapitalwhichisrepresentedbyaccountsreceivable.Creditinsuranceprotectssuppliersincasearetailerfailstopaythemformerchandise,asintheeventofabankruptcy.•Crop-hailInsurance:Protectionagainstdamagetogrowingcropsasaresultofhailorcertainothernamedperils.•CSR:Customerservicerepresentativessupporttheworkofinsuranceagentswithavarietyoftasksthatmustbedonewithinacompanyoragencytodeliverservicestoandhandlerequestsfromclients.-D-•DamagetoRentedPremises(akaFireLegalLiabilityCoverage):Coversyourliabilitytoothersifyouoccupyleasedorrentedpropertyforwhichyoucouldbeheldlegallyliablefordamagetothepropertyduetofireorexplosion.•DeathandDisgraceInsurance:Insurancetocoverlargecorporationswhoendorseplayers,celebrities,etc.andcancoverthecompanyincaseabrandambassadordiesorturnsintoapersonanongrata(causingharmtoabrandnameduetoillicitorinappropriateactivity).LanceArmstrong,TigerWoodsandPaulaDeanareallexamplesofAmericaniconswholostendorsementdealsbecauseofpublicoutrageandscandal.•Declination:Theinsurer'srefusaltoinsureanindividualaftercarefulevaluationoftheapplicationforinsuranceandanyotherpertinentfactors.•Deductible:Anamountwhichapolicyholderagreestopay,perclaimorperaccident,towardthetotalamountofaninsuredloss.•DefectiveorFaultyWorkmanship:Althoughthedefinitionofwhatconstitutesaconstructiondefectvariesbyjurisdiction,adefectgenerallyoccurswhenproblemsindesign,workmanshiporbuildingmaterialsresultinpropertydamageorfailureofthebuildingtoperforminanexpectedway.Commonclaimsincludecracksinfloorslabsandfoundationsduetoimpropersitepreparation,roofleakage—



particularlyonflatroofs—duetofaultyconstructionandstructuralshiftingcausedbyerrorsindesignorconstructionthatleadstoanynumberofinteriorproblemsrangingfromstickingdoorsandwindowstocountertopsthatpullawayfromwalls.Defectsalsoarecategorizedas“patent”(somethingfoundthroughareasonableinspection)and“latent,”somethingthatmanifestsitselfovertime.Forexample,apatentdefectcausingwaterdamagecouldinvolveleakypipes,whichshouldhavebeendetectedduringaninspectionandrepaired.Alatentdefectcausingwaterdamagemayinvolvefreezingpipesduetoinadequateinsulation,whichisn'teasilynotedoncewallsareenclosed.Whataddedprotectiondoesafaultyworkmanshipendorsementprovide?Protectyourselfagainstclaimsarisingoutoffaultyworkmanship,materialsorproducts,suchastheclasscodeexamplesdescribedbelow.(Theseclaimswouldotherwisebeexcludedbythe“businessrisk”exclusionsfoundineverystandardISOCommercialGeneralLiabilitypolicy.)Electrical-WithinBuildings:Installationofwiring,switches,breaker,orfixturesthatareeitherinsufficientorincontraventionwithplansandspecificationsrequiresreplacement.Carpentry-Residential:Failuretoobtainapermitormeetbuildingcodesandbuildingdepartmentrequiresremovaloftheworkperformed.FloorCovering-NoTile:Improperinstallationofvaporbarriermaycausewarpingandrequirereplacementofexoticwoodflooring.HVAC:WhilereplacinganHVACunit,faultyinstallationofthenewunitcausestheheatexchangerorcompressortofail,requiringcostlyrepairs.PaintExterior-3Stories&Under:Aftercompletingtheexteriorpaintingofahouse,thepaintbeginstopeelanddeteriorate.Thus,theentirehousemustbere-painted.Tile/StoneInstallation:Crooked,hollowsounding,oruneventile,ortileusedincontraventionoftheplansandspecificationsrequiresdemolitionandreplacementofthetile.•DependentBenefits:SocialSecuritybenefitsavailabletothespouseorchildrenofaSocialSecuritybeneficiary.•Depreciation:Adecreaseinthevalueofpropertyoveraperiodoftimeduetowearandtearorobsolescence.Depreciationisusedtodeterminetheactualcashvalueofpropertyattimeofloss.(SeeActualCashValue)•DIC(orDifferenceinConditions):WhatisDIC?TherearetwocommonformsthatareusedbyInsuranceCarriers:DIC=DifferenceinConditions(typicallyusedwhenaddingperils–DICpoliciesincludecoverageforlandslide,mudflow,earthquakeandflood.)



The“DifferenceinConditions”policyformisusedtodaytowraparoundanAllRiskpolicycoveringspecificexposuresnotcoveredwithintheAllRiskpolicy.DICpolicieswillexcludetheperilscoveredundertheAllRiskpolicyandaddadditionalexclusionstolimitthecoverageundertheDICpolicy.YouspecificallyhavetonametheitemsyoudowantcoveredsuchasEarthquake,EQSL(EarthquakeSprinklerLeakage),Landslide,Mudflow,FloodorWind.TheNamedPerilpolicyformspecificallynameswhatistobecoveredinthepolicy.TypicalchoiceswouldbeEarthquake,EQSL(EarthquakeSprinklerLeakage),Landslide,Mudflow,FloodorWind.Whatisthedifferencebetweenthetwopolicies:WhenunderwritersissueaDICpolicytheyaretrulyratingforandexpectingtoonlypaylossesfortheperilindicatedsuchasEarthquakeorEQSL(EarthquakeSprinklerLeakage),Landslide,Mudflow,FloodorWind.Thereispotentialtopayforlossesundersomeunknowncauseifitisnotspecificallyexcluded(Y2Kisagoodexample-itisnowexcludedbutlossescouldhavebeensubmittedunderaDICpolicyifsuchanexclusionwasnotonthepolicy).NamedPerilpoliciesleavenodoubtastowhatisbeingcoveredandcanbepricedatbitmorecompetitive.NotallcarriersofferaNamedPerilpolicy.•DirectLoss:Financiallossthatresultsdirectlyfromaninsuredperil.•Disability:aphysicaloramentalimpairmentthatsubstantiallylimitsoneormoremajorlifeactivitiesofanindividual.Itmaybepartialortotal.(SeePartialDisability;TotalDisability.)•DisabilityBenefit:Periodicpayments,usuallymonthly,payabletoparticipantsundersomeretirementplans,ifsuchparticipantsareeligibleforthebenefitsandbecometotallyandpermanentlydisabledpriortothenormalretirementdate.•DisabilityIncomeInsurance:Aformofhealthinsurancethatprovidesperiodicpaymentstoreplaceincomewhenaninsuredpersonisunabletoworkasaresultofillness,injury,ordisease.•Dismemberment:Lossofbodymembers(limbs),orusethereof,orlossofsightduetoinjury.•Dividend:Areturnofpartofthepremiumonparticipatinginsurancetoreflectthedifferencebetweenthepremiumchargedandthecombinationofactualmortality,expenseandinvestmentexperience.Suchpremiumsarecalculatedtoprovidesomemarginovertheanticipatedcostoftheinsuranceprotection.•D&O(Directors&OfficersInsurance):Liabilityinsurancepayabletothedirectorsandofficersofacompany,ortotheorganization(s)itself,tocoverdamagesordefensecostsintheeventtheysuffersuchlossesasaresultofalawsuitforallegedwrongfulactswhileactingintheircapacityasdirectorsandofficersfortheorganization.Suchcoveragecanextendtodefensecostsarisingoutofcriminalandregulatoryinvestigations/trialsaswell;infact,oftencivilandcriminalactionsarebroughtagainstdirectors/officerssimultaneously.Ithasbecomecloselyassociatedwithbroadermanagementliabilityinsurance,whichcoversliabilitiesofthecorporationaswellasthepersonalliabilitiesforthedirectorsandofficersofthecorporation.Underthe"traditional"D&Opolicyappliedto"publiccompanies"(thosehavingsecuritiestradingundernationalsecuritiesexchangesetc.),therearethree(3)insuringclauses.Theseinsuringclausesaretermed:Side-Aor"non-indemnified";Side-B;or"indemnified";andSide-C;"entitysecuritiescoverage".D&OpoliciesmayalsoprovideanadditionalSide-Dclause,whichprovidesforasublimitforinvestigativecostscoveragerelatedtoashareholderderivativedemand.Indetail,thecoverageclausesprovidethefollowing:

• Side-Aprovidescoveragetoindividualdirectorsandofficerswhennotindemnifiedbythecorporationasaresultofstatelaworfinancialcapabilityofthecorporation;however,exclusionsmayapplyifacorporationsimplyrefusestopaythelegaldefense/lossofadirectororofficer,orifabankruptcycourtissuesanorderpreventingsuchindemnification

• Side-Bprovidescoverageforthecorporation(organizations)whenitindemnifiesthedirectorsandofficers(corporatereimbursement)



• Side-Cprovidescoveragetothecorporation(organizations)itselfforsecuritiesclaimsbrought

againstit(NOTE:securitiesclaimsonlycoverageappliestopubliclytradedcompaniesandlargeprivatecompanies;smallprivatecompaniesmaybeabletoobtainbroader"entity"coverage)

MoreextensivecoveragecanbeobtainedforindividualdirectorsandofficersunderaBroadFormSide-ADIC("DifferenceinConditions")policypurchasedtonotonlyprovideexcessSide-Acoveragebutalsotofillthegapsincoverageunderthetraditionalpolicy,respondwhenthetraditionalpolicydoesnot,protecttheindividualdirectorsandofficersinthefaceofU.S.bankruptcycourtsdeemingtheD&Opolicypartofthebankruptcyestateandotherwisemorefullyprotectthepersonalassetsofindividualdirectorsandofficers.•DollarThreshold:Inno-faultautoinsurancestateswiththedollarthreshold,itpreventsindividualsfromsuingintorttorecoverforpainandsufferingunlesstheirmedicalexpensesexceedacertaindollaramount.•DP-2–BroadForm:IncludestheFire,ECandVMMperilsofDP-1andaddsthefollowingperils(eachsubjecttocertainlimitations):Damagebyburglars;fallingobjects;weightofice,snoworsleet;accidentaldischargeoroverflowofwaterorsteamfromwithinaplumbing,heating,airconditioningorautomaticfireprotectivesprinklersystemorfromwithahouseholdappliance;suddenandaccidentaltearingapart,cracking,burningorbulgingofasteamorhotwaterheatingsystem,airconditioningsystemorautomaticfireprotectivesprinklersystem,orwaterheatingappliance;freezingofaplumbing,heating,airconditioningorautomaticfireprotectivesprinklersystemorofahouseholdappliance;suddenandaccidentaldamagefromartificiallygeneratedelectricalcurrent;volcaniceruption.•DramshopLaw:Lawthatimputesnegligencetotheownerofabusinessthatsellsliquorinthecasethatanintoxicatedcustomercausesinjuryorpropertydamagetoanotherperson.Usuallyexcludedfromgeneralliabilitypolicies.•DwellingProperty1:Propertyinsurancepolicythatinsuresthedwellingatactualcashvalue,otherstructures,personalproperty,fairrentalvalue,andcertainothercoverage’s.Coversalimitednumberofperils.•DwellingProperty2:Propertyinsurancepolicythatinsuresthedwellingandotherstructuresatreplacementcost.Itaddsadditionalcoverage’sandhasagreaterlistofcoveredperilsthantheDwellingProperty1policy.•DwellingProperty3:Propertyinsurancepolicythatcoversthedwellingandotherstructuresagainstdirectphysicallossfromanyperilexceptforthoseperilsotherwiseexcluded.However,personalpropertyiscoveredonanamed-perilsbasis.-E-•EarnedIncome:Employmentincomederivedfromsalary,wages,commissions,orfees.•EarnedPremium:Theportionofaninsurancewrittenpremiumwhichisconsidered"earned"bytheinsurer,basedonthepartofthepolicyperiodthattheinsurancehasbeenineffect,andduringwhichtheinsurerhasbeenexposedtoloss.Forinstance,ifa365-daypolicywithafullpremiumpaymentatthebeginningofthetermhasbeenineffectfor120days,120/365ofthepremiumisconsideredearned.Earnedpremiumwillnotbereturnedtotheinsuredifthepolicyiscancelled.•EC:ExtendedCoverage;

W–WindstormC–CivilCommotionS–SmokeH–HailA–AircraftV–VehiclesV–VolcanicEruptionE–ExplosionR–Riot



•EffectiveDate:Thedateonwhichtheinsuranceunderapolicybegins.•EIFS(ExteriorInsulationandFinishingSystem):Atypeofbuildingexteriorwallcladdingsystemthatprovidesexteriorwallswithaninsulatedfinishedsurfaceandwaterproofinginanintegratedcompositematerialsystem.•ElementsofaNegligentAct:Fourelementsaninjuredpersonmustshowtoprovenegligence:existenceofalegaldutytousereasonablecare,failuretoperformthatduty,damagesorinjurytotheclaimant,andproximatecauserelationshipbetweenthenegligentactandtheinflictionofdamages.•ElevationCertificate:TheElevationCertificateisanimportantadministrativetooloftheNationalFloodInsuranceProgram(NFIP).Itistobeusedtoprovideelevationinformationnecessarytoensurecompliancewithcommunityfloodplainmanagementordinances,todeterminetheproperinsurancepremiumrate,andtosupportarequestforaLetterofMapAmendment(LOMA)orLetterofMapRevisionbasedonfill(LOMR-F).TheElevationCertificateisrequiredinordertoproperlyratepost-FIRMbuildings.•Embezzlement:Fraudulentuseortakingofanother'spropertyormoneywhichhasbeenentrustedtoone'scare.•Employer'sLiabilityInsurance(WorkComp):Thiscoverageprovidedbypart2oftheworkerscompensationpolicyprovidescoveragetotheinsured(employer)forliabilitytoemployeesforwork-relatedbodilyinjuryordisease,otherthanliabilityimposedontheinsuredbyaworkerscompensationlaw.Aproductforemployersthatprotectsthemfrommajorfinanciallossifaworkerexperiencesajob-relatedinjuryorillnessthatworkerscompensationdoesn’tcover.Employer'sliabilityinsurancecanbepackagedwithworkerscompensationinsurancetofurtherprotectcompaniesagainstthecostsassociatedwithworkplaceinjuries,illnessesanddeathsthataren’tcoveredunderworkerscompensation.Employer'sliabilityinsuranceisalsocalled“part2”ofaworkers’compensationpolicy.•Endorsements:Anadditionalpieceofpaper,notapartoftheoriginalcontract,whichcitescertaintermsandwhich,whenattachedtotheoriginalcontract,becomesalegalpartofthatcontract.Anamendmentofthepolicyusuallybymeansofarubberstamporrider.•E&O(Errors&OmissionsInsurance):Liabilityinsurancepolicythatprovidesprotectionagainstlossincurredbyaclientbecauseofsomenegligentact,error,oromissionbytheinsured.•EPLI(EmploymentPracticesLiabilityInsurance):Coverscompaniesagainstlawsuitsorclaimsfiledbyemployees,formeremployeesandemploymentcandidates.Theinsurancecoverageprotectsthecompany,itsdirectors,officersandotheremployees.Acompanycanusethistypeofinsurancetocoverexpensesassociatedwithemployeerightsviolations,suchasallegedactsofdiscriminationandwrongfultermination.EmploymentPracticesLiabilityInsurancecoverslossesthatwouldnotbecoveredbyDirectors&Officers(D&O)coverageorComprehensiveGeneralLiability.EPLIisaveryspecializedkindofinsurance,designedtoprotectyourcompanyinwaysthatareessentialintoday'slitigioussociety.•Estoppels:Legaldoctrinesthatpreventapersonfromdenyingthetruthofapreviousrepresentationoffact,especiallywhensuchrepresentationhasbeenreliedonbytheonetowhomthestatementwasmade.•ExcessandSurplusInsurance:1)Insurancetocoverlossesaboveacertainamount,withlossesbelowthatamountusuallycoveredbyaregularpolicy.2)Insurancetocoveranunusualorone-timerisk,e.g.,damagetoamusician'shandsorthemultipleperilsofaconvention,forwhichcoverageisunavailableinthenormalmarket.(Seealso"UmbrellaLiability"and"SurplusLines.")•Exclusions:Specificconditionsorcircumstanceslistedinthepolicyforwhichthepolicywillnotprovidebenefitpayments.•ExclusiveRemedyDoctrine:Doctrineinworkerscompensationinsurancewhichstatesthatworkerscompensationbenefitsshouldbetheexclusiveorsolesourceofrecoveryforworkerswhohaveajobrelatedaccidentordisease;doctrinehasbeenerodedbylegaldecisions.•ExperienceModificationFactor:Usedinworkerscompensationratingtoreflectthedegreetowhichaparticularemployerhasexperiencethatisbetterorworsethatexpectedforthatindustry.Weightedbyemployer'scredibilityfactor.



•ExperienceRating:Theprocessofdeterminingthepremiumrateforagrouprisk,whollyorpartiallyonthebasisofthatgroup'sexperience.•ExposureUnit:Unitofmeasurementusedininsurancepricing.•ExtendedNon-ownedCoverage:Endorsementthatcanbeaddedtoanautomobileliabilityinsurancepolicythatcoverstheinsuredwhiledrivinganynonownedautomobileonaregularbasis.•Extortion:Surrenderofpropertyawayfromthepremisesasaresultofathreattodobodilyharmtothenamedinsured,relative,orinviteewhoisbeingheldcaptive.•ExtracontractualDamages:Damagesthatareinadditiontooroutsideofacontractofinsurance.Extracontractualdamagesareawardedin"badfaith"claimsagainstinsurancecompanies.Theyareaformofpunitivedamages,intendedtopunishextremeinsurerconduct.Extracontractualdamageawardsmostfrequentlyarisefromunfairclaimshandlingpractices(e.g.,unjustdenialofcoverage,failuretosettleaclaimwithinpolicylimits).-F-•FairRentalValue:Amountpayabletoaninsuredhomeownerforlossofrentalincomeduetodamagethatmakesthepremisesuninhabitable.•FaultyWorkmanshipCoverageEndorsement:ContractorsFaultyWorkmanshipCoverageisanewanduniqueendorsementthatprovidesa$10,000limittoprotectyourclientsagainstclaimsarisingoutoffaultyworkmanship,materialsorproducts.Theseclaimswouldotherwisebeexcludedbythe“businessrisk”exclusionsfoundineverystandardISOCommercialGeneralLiabilitypolicy.Instatesthatrequireacontractor’slicensebond,claimsarisingoutoffaultyworkmanship,materialsorproductsmayalsobemadeagainstthecontractor’slicensebond.Ifthebondingcompanypaysanysuchclaim,thecontractormustrepaythebondingcompany.Thecontractor’sfailuretorepaythebondingcompanycouldresultinsuspensionorrevocationoftheircontractor’slicense.Byprotectingagainstbondclaims,theContractorsFaultyWorkmanshipCoveragealsoprotectsthecontractor’slicense,andtheirlivelihood.FaultyWorkmanshipExclusionMostliabilitypoliciescontainthispropertydamageexclusionforproducts-completedoperationslosses,althoughitisnowmoreoftenreferredtoastheworkperformedexclusion.Theintentofthisexclusionistomakesurethatinsuredsaremaintainingacceptablestandardsofperformanceandarenotusingtheinsurancecontracttorecoverforpoortraining,poorbusinesspracticesorpoorinstallationbytheinsured.ThefollowingisapostbyJamesWakefieldfromhttp://www.cumminsandwhite.com/2012/03/when-does-insurance-cover-faulty-workmanship/Usually,commercialgeneralliability(“CGL”)policiesdonotcoveracontractorforpropertydamageduetothecontractor’sownfaultyworkmanship.AsoneCaliforniacourtsummarized:“Generallyliabilitypolicies…arenotdesignedtoprovidecontractors…withcoverageagainstclaimstheirworkisinferiorordefective….Ratherliabilitycoveragecomesintoplaywhenthecontractor’s(insured)defectivematerialsorworkcauseinjurytopropertyotherthantheinsured’sownworkorproducts.”ClarendonAmericaIns.Co.v.GeneralSec.Indem.Co.ofArizona,193Cal.App.4th1311,1325(2011)(emphasisadded.Suppose,forexample,acontractorishiredtoinstallawaterheaterthatexplodes,resultingintheentirehouseburningdown.Thewaterheater(andthelabortoremoveandreinstall)isnotcovered,butthedamagetotherestofthepropertymaywellbe.Thisdistinctionbetweencoveredanduncoveredpropertydamagefromacontractor’sworkmanshipmaybeoutlinedinthe“yourwork”or“faultyworkmanship”exclusionoftheinsurancepolicy.Theexclusion



usuallystatesthatthepolicydoesnotcoverpropertydamagefor“thatparticularpartofanypropertythatmustberestored,repairedorreplacedbecause‘yourwork’wasincorrectlyperformedonit.”Butwhatifitwasn’treallyyou,thecontractor,whoperformedthework?Whatifitwasasubcontractoryouhiredwhoperformedtheworkthatturnedouttobefaulty?Aninterestingexceptiontothe“yourwork”exclusioninmostcurrentstandardformCGLpoliciesprovidesthat,ifasubcontractorcausedthedefect,theremaystillbecoverage.Thisexceptiontypicallystatesthattheexclusion“doesnotapplyifthedamagedworkorworkoutofwhichthedamageariseswasperformedonyourbehalfbyasubcontractor.”ThefollowingisapostbyCraigF.Stanovich,CPCU,CIC,CRM,AUisco-founderandprincipalofAustin&StanovichRiskManagers,LLCfromhttp://www.amwins.com/Pages/Client%20Advisories/Construction_Defect_Claims_1.15.aspx?spMailingID=10396961&spUserID=MTIzOTAwNDIwMDE4S0&spJobID=461267455&spReportId=NDYxMjY3NDU1S0Asanillustration,shouldasubcontractormisreadtheplansandinstalltwobyfourinchjoistswhentheplancallsfortwobysixinchjoists,thecosttoremoveandreinstalltheproperjoistsisnotcoveredbytheCGLasthereisnopropertydamage.However,ifthejoistsresultinthecollapseofthestructure,thegeneralcontractor,whoseworkistheentirehousebeingbuilt,wouldhavecoverageforthedamagetoportionsofthegeneralcontractor’swork(duetothesubcontractorexception)thatwasnototherwisedefective.•FederalCropPolicies:USDA-RMA(UnitedStatesDepartmentofAgricultureRiskManagementAgency)providespoliciesformorethan100crops.Policiestypicallyconsistofgeneralcropinsuranceprovisions,specificcropprovisions,policyendorsementsandspecialprovisions.SeeRMA'scountycropprogramlistingsforinformationaboutcroppoliciesavailableinspecificcountiesandstates.

Policiesareavailableformostcommodities;however,somepoliciesarebeingtestedaspilotsorhavenotbeenexpandednationwidesoarenotavailableinallareas.

FederalCropPolicyInsurancePlansprovidedifferenttypesofinsurancecoveragetospecificcommodities:

• ActualProductionHistory(APH)policiesinsureproducersagainstyieldlossesduetonaturalcausessuchasdrought,excessivemoisture,hail,wind,frost,insects,anddisease.Theproducerselectstheamountofaverageyieldtoinsure;from50-75percent(insomeareasto85percent).Theproduceralsoselectsthepercentofthepredictedpricetoinsure;between55and100percentofthecroppriceestablishedannuallybyRMA.Iftheharvestedplusanyappraisedproductionislessthantheyieldinsured,theproducerispaidanindemnitybasedonthedifference.Indemnitiesarecalculatedbymultiplyingthisdifferencebytheinsuredpercentageofthepriceselectedwhencropinsurancewaspurchasedandbytheinsuredshare.

• ActualRevenueHistory(ARH)planofinsurancehasmanyparallelstotheAPHplanofinsurance,withtheprimarydifferencebeingthatinsteadofinsuringhistoricalyields,theplaninsureshistoricalrevenues.ThepolicyisstructuredasanendorsementtotheCommonCropInsurancePolicyBasicProvisions.ItrestatesmanyoftheAPHyieldprocedurestoreflectarevenueproduct.EachcropinsuredunderARHhasuniquecropprovisions.Likecurrentrevenuecoverageplans,theARHpilotprogramprotectsgrowersagainstlossesfromlowyields,lowprices,lowquality,oranycombinationoftheseevents.

• AdjustedGrossRevenue(AGR)andAGR-Litepoliciesinsurerevenueoftheentirefarmratherthananindividualcropbyguaranteeingapercentageofaveragegrossfarmrevenue,includinga



smallamountoflivestockrevenue.Thepoliciesuseinformationfromaproducer'sScheduleFtaxforms,andcurrentyearexpectedfarmrevenue,tocalculatepolicyrevenueguarantee.

• DollarPlanpoliciesprovideprotectionagainstdecliningvalueduetodamagethatcausesayieldshortfall.Theamountofinsuranceisbasedonthecostofgrowingacropinaspecificarea.Alossoccurswhentheannualcropvalueislessthantheamountofinsurance.Themaximumdollaramountofinsuranceisstatedontheactuarialdocument.TheinsuredmayselectapercentofthemaximumdollaramountequaltoCAT(catastrophiclevelofcoverage),orpurchaseadditionalcoveragelevels.

• GroupRiskPlan(GRP)isdesignedasariskmanagementtooltoinsureagainstwidespreadlossofproductionoftheinsuredcropinacounty.GRPpoliciesuseacoutyyieldindexasthebasisfordeterminingaloss.Whentheestimatedcountyyieldfortheinsuredcrop,asdeterminedbyNationalAgriculturalStatisticsService(NASS),fallsbelowthetriggeryieldlevelchosenbytheproducer,anindemnityispaid.Paymentsarenotbasedonanindividualproducer'scropyields.Coveragelevelsareavailableforupto90percentoftheexpectedcountyyield.GRPinvolveslesspaperworkandcostslessthanplansofinsuranceagainstindividualloss,asdescribedabove.UnderGRP,insuredacreageforanindividualproducer'scropmayhavelowyieldsandnotreceiveapaymentifthecountydoesnotsufferasimilarlevelofyieldloss.Thisinsuranceisprimarilyintendedforproducerswhosecropyieldstypicallyfollowtheaveragecountyyield.

• GroupRiskIncomeProtection(GRIP)isdesignedasariskmanagementtooltoinsureagainstwidespreadlossofrevenuefromtheinsuredcropinacounty.GRIPpoliciesuseacountyrevenueindexasthebasisfordeterminingalossbyusingtheestimatedcountyyieldfortheinsuredcrop,asdeterminedbyNationalAgriculturalStatisticsService(NASS),multipliedbytheharvestprice.Ifthecountyrevenuefallsbelowthetriggerrevenuelevelchosenbytheproducer,anindemnityispaid.UnlikeGRP,itisnotnecessarytohaveadeclineinyieldtobeindemnified,aslongasthecombinationofpriceandyieldresultsinacountyrevenuethatislessthanthetriggerrevenue.Paymentsarenotbasedonindividualproducer’scropyieldsandrevenues.Coveragelevelsareavailableforupto90percentoftheexpectedcountyrevenue.GRIPinvolveslesspaperworkandcostslessthanplansofinsuranceagainstindividuallossasdescribedabove.UnderGRIP,anindividualproducer’scropmayreceivereducedrevenuefromtheinsuredacreageandnotreceiveapaymentunderthisplanifthecountydoesnotsufferasimilarlevelofrevenueloss.Thisinsuranceisprimarilyintendedforproducerswhosecropyieldstypicallyfollowtheaveragecountyyieldandwishtoinsurethatthecombinationofyieldandpriceresultinaparticularlevelofrevenue.

• GroupRiskIncomeProtection-HarvestRevenueOption(GRIP-HRO)isasupplementalendorsementtotheGRIPBasicProvisions.TheHarvestRevenueOptionchangesthetriggerrevenuetobetheresultofmultiplyingtheexpectedcountyyieldbythegreateroftheexpectedpriceortheharvestpriceandbytheproducerchosencoveragelevelpercentage.Ifthecountyrevenuefortheinsuredcrop,type,andpracticefallsbelowtheGRIP-HROtriggerrevenue,anindemnityispaid.

• Livestockpoliciesaredesignedtoinsureagainstdecliningmarketpricesoflivestockandnotanyotherperil.CoverageisdeterminedusingfuturesandoptionspricesfromtheChicagoMercantileExchangeGroup.Priceinsuranceisavailableforswine,cattle,lambsandmilk.Producersdecidethenumberofhead(cwtofmilk)toinsureandthelengthofthecoverageperiod.Therearetwotypesofplansavailable:LivestockRiskProtection,providescoverageagainstmarketpricedecline,iftheendingpriceislessthantheproducerdeterminedbeginningpriceandindemnityisdue;andLivestockGrossMargin,providescoverageforthedifferencebetweenthecommodityandfeedingcosts.Iftheproducerdeterminedexpectedgrossmarginisgreaterthantheactualgrossmargin,anindemnityisdue.

• RainfallIndex(RI)isbasedonweatherdatacollectedandmaintainedbytheNationalOceanicandAtmosphericAdministration'sClimatePredictionCenter.Theindexreflectshowmuch



precipitationisreceivedrelativetothelong-termaverageforaspecifiedareaandtimeframe.Theprogramdividesthecountryintosixregionsduetodifferentweatherpatterns,withpilotsavailableinselectcounties.

• RevenueProtectionpoliciesinsureproducersagainstyieldlossesduetonaturalcausessuchasdrought,excessivemoisture,hail,wind,frost,insects,anddisease,andrevenuelossescausedbyachangeintheharvestpricefromtheprojectedprice.Theproducerselectstheamountofaverageyieldheorshewishestoinsure;from50-75percent(insomeareasto85percent).Theprojectedpriceandtheharvestpriceare100percentoftheamountsdeterminedinaccordancewiththeCommodityExchangePriceProvisionsandarebasedondailysettlementpricesforcertainfuturescontracts.Theamountofinsuranceprotectionisbasedonthegreateroftheprojectedpriceortheharvestprice.Iftheharvestedplusanyappraisedproductionmultipliedbytheharvestpriceislessthantheamountofinsuranceprotection,theproducerispaidanindemnitybasedonthedifference.

• RevenueProtectionWithHarvestPriceExclusionpoliciesinsureproducersinthesamemannerasRevenueProtectionpolices,excepttheamountofinsuranceprotectionisbasedontheprojectedpriceonly(theamountofinsuranceprotectionisnotincreasediftheharvestpriceisgreaterthantheprojectedprice).Iftheharvestedplusanyappraisedproductionmultipliedbyharvestpriceislessthantheamountofinsuranceprotection,theproducerispaidanindemnitybasedonthedifference.

• VegetationIndex(VI)isbasedontheU.S.GeologicalSurvey'sEarthResourcesObservationandScience(EROS)normalizeddifferencevegetationindex(NDVI)dataderivedfromsatellitesobservinglong-termchangesingreennessofvegetationoftheearthsince1989.Theprogramdividesthecountryintosixregionsduetodifferentweatherpatterns,withpilotsavailableinselectcounties.

• YieldProtectionpoliciesinsureproducersinthesamemannerasAPHpolices,exceptaprojectedpriceisusedtodetermineinsurancecoverage.TheprojectedpriceisdeterminedinaccordancewiththeCommodityExchangePriceProvisionsandisbasedondailysettlementpricesforcertainfuturescontracts.Theproducerselectsthepercentoftheprojectedpriceheorshewantstoinsure,between55and100percent.

FederalCropPolicyEndorsementsandOptionsareavailableforsomecropprovisionsthataddsupplementalcoverage,excludecoverageorotherwisemodifycoverage.Anendorsementoroptiongenerallymustbeappliedforonorbeforethesalesclosingdate.

• CatastrophicRiskProtectionEndorsement(CATCoverage)pays55percentofthepriceofthecommodityestablishedbyRMAoncroplossesinexcessof50percent.ThepremiumonCATcoverageispaidbytheFederalGovernment;however,producersmustpaya$300administrativefee(asofthe2008FarmBill)foreachcropinsuredineachcounty.Limited-resourceproducersmayhavethisfeewaived.CATcoverageisnotavailableonalltypesofpolicies.

• High-RiskAlternateCoverageEndorsement(HR-AQCE)isaprivatelydevelopedproductapprovedthroughthe508(h)processwhichallowsaproducerwhofarmsbothhigh-riskandnon-high-risklandtoinsurethehigh-risklandatanadditionalcoveragelevelwhichislowerthanthecoveragelevelonthenon-high-riskland.Beginningwiththe2013cropyear.TheHR-ACEisavailableforcorn,soybeans,wheat,andgrainsorghumincertaincountiesasspecifiedintheactuarialdocuments.

o *Seeactuarialdocumentsforotherendorsementsandoptionsavailabletoaspecificcommodity.

•FidelityBond:Aformofprotectionwhichreimbursesanemployerforlossescausedbydishonestorfraudulentactsofemployees.Afidelitybondisaformofinsuranceprotectionthatcoverspolicyholders



forlossesthattheyincurasaresultoffraudulentactsbyspecifiedindividuals.Itusuallyinsuresabusinessforlossescausedbythedishonestactsofitsemployees.Whilecalledbonds,theseobligationstoprotectanemployerfromemployee-dishonestylossesarereallyinsurancepolicies.[1]Theseinsurancepoliciesprotectfromlossesofcompanymonies,securities,andotherpropertyfromemployeeswhohaveamanifestintenttocausethecompanyloss.Therearealsomanyotherformsofcrime-insurancepolicies(burglary,fire,generaltheft,computertheft,disappearance,fraud,forgery,etc.)toprotectcompanyassets.•Fiduciary:Apersonwhoholdssomethingintrustforanother.•FinalExpenseInsurance(akaBurialorFuneral):Finalexpenseinsurance,alsoknownas"burial"or"funeral"insurance,isalifeinsurancepolicywithalowfacevalue,suchas$5,000to$50,000,thatyoubuydirectlyfromaninsurancecompany.Youcannameanybeneficiary,typicallyafamilymember,whowouldmaketheclaimandreceivethemoneyuponyourdeath.Thatbeneficiarywouldthenberesponsibleforusingthemoneytocarryoutyourwishes.Thebeneficiarylegallycoulddecidetousethemoneyanywaytheywant,somakesureyoutrustyourbeneficiary.Also,ifyourbenefitamountexceedsthecostofyourfuneral,thebeneficiarykeepsthedifference.Forexample,ifyouhaveafinalexpensepolicyfor$15,000andyourservicesandburialendupcosting$12,000,yourbeneficiarywouldpaythebillandkeeptheextra$3,000.Finalexpensepoliciesareeither"termlife"(whichcoversyouforaspecifictimeperiodoruntilacertainage,thenexpires)or"wholelife"(whichcoversyoufortherestofyourlife).Theyaregenerallyeither"simplifiedissue"policies,forwhichyou'reaskedseveralmedicalquestionsbutdon'thavetotakeamedicalexam,or"guaranteedissue,"wherethepolicyisissuedtoanyonewhoapplieswithnomedicalquestionsasked.•FIO(FederalInsuranceOffice):TheFederalInsuranceOffice(FIO)wasestablishedbyTitleVoftheDodd-FrankWallStreetReformandConsumerProtectionAct(DFA).TheFIOishousedintheDepartmentoftheTreasuryandisheadedbyaDirectorwhoisappointedbytheSecretaryoftheTreasury.WhiletheFIOservesanimportantrolebyprovidingnecessaryexpertiseandadviceregardinginsurancematterstotheTreasuryDepartmentandotherfederalagencies,itisnotaregulatoryagencyanditsauthoritiesdonotdisplacethetime-testedrobuststateinsuranceregulatoryregime.

TheNAICcoordinatescloselywiththeFederalInsuranceOfficetoserveasaninformationresourceforthefederalgovernmentandtoengageininternationaldiscussionsinconjunctionwithU.S.insuranceregulators.

FIOScopeandFunctionsTheFIO’sauthoritiesextendtoalllinesofinsuranceotherthanhealthinsurance,long-termcareinsurance(exceptthatwhichisincludedwithlifeorannuityinsurancecomponents)andcropinsurance,whichisgovernedbytheFederalCropInsuranceAct.TheFIOdoesnothavesupervisoryofregulatoryauthorityoverthebusinessofinsurance.

TheFIOischargedwithmonitoringallaspectsoftheinsurancesector,includingidentifyingactivitieswithinthesectorthatcouldpotentiallycontributetoasystemiccrisistothebroaderfinancialsystem,theextenttowhichunder-servedcommunitieshaveaccesstoaffordableinsuranceproducts,andthesector’sregulation.TheDirectoroftheFIOservesasanon-votingmemberoftheFinancialStabilityOversightCouncil(FSOC).Healsoplaysaroleintheresolutionofcertaintroubledinsurancecompanies.



TheFIOadvisestheSecretaryoftheTreasuryonmajordomesticandprudentialinternationalinsurancematters.TheFIOhasauthoritytorepresenttheU.S.federalgovernmentinternationallyatmeetingsoftheInternationalAssociationofInsuranceSupervisors(IAIS)andothersimilarorganizations.However,stateinsuranceregulators,eitherdirectlyorthroughtheirNAICrepresentatives,presenttheviewsoftheinsuranceregulatorycommunityinternationally.

FIOPowersInordertocarryoutthesefunctions,theFIOisauthorizedtoreceiveandcollectdataandinformationontheinsuranceindustryandcanenterintoinformationsharingagreementswithstateregulators.TheFIOcanalsorequireaninsureroritsaffiliatetosubmitdatatotheoffice;however,theFIOmustfirstdeterminewhetheranypublicorregulatorysourcesareavailablebeforerequiringsuchinformationdirectlyfromaninsurer.ThelawprovidesanexemptionforsmallinsurersthatmeetaminimumsizethresholdnotyetdefinedbytheFIO.

FIOReportsAprimaryfunctionoftheFIOistoissueseveralone-timereportsaswellasannualreportstoCongress.•FireFollowing(Terrorism):Insomestatesadoctrineknowas“firefollowing”applies.Thismeansthatintheeventofaterrorist-causedexplosionfollowedbyfire,insurerscouldbeliabletopayoutlossesattributabletothefire(butnottheexplosion)evenifacommercialpropertyownerhadnotpurchasedterrorismcoverage.lawsrequiringcoveragefor“fire-following”anevent—knownasthestandardfirepolicy(SFP)—irrespectiveofthefire’scause.Therefore,inSFPstates,firefollowingaterroristeventiscoveredwhetherthereisinsurancecoverageforterrorismornot.Therefore,whentheinsuredelectstorejectTerrorismcoverage,FireFollowingTerrorismcoveragecannotberejectedfromthepolicy.•FireInsurance:Coverageforlossescausedbyfireandlightning,plusresultantdamagecausedbysmokeandwater.

•FireLegal/DamageLiability(akaDamagetoRentedPremises):Toprotectaninsuredforfiredamagecausedbynegligenceofanddamagetopropertyofanotherwhilerenting/leasingproperty(Anofficespaceyourent).Coversyourliabilitytoothersifyouoccupyleasedorrentedpropertyforwhichyoucouldbeheldlegallyliablefordamagetothepropertyduetofireorexplosion.•FireLegalLimit:Coverageforpropertylossliabilityastheresultofnegligentactsand/oromissionsoftheinsuredthatallowsaspreadingfiretodamageothers'property.Negligentactsandomissionscanresultinfirelegalliability.Forexample,atenantoccupyinganotherparty'spropertythroughnegligencecausesseriousfiredamagetotheproperty.•FireProtectionClass(1-10),PublicProtectionClassification(PPC™)orFireSuppressionRatingSchedule(FSRS):Indicatestheproximityoffireresourcestotheinsured’slocation.ProtectionClass3iscommonforbuildingswithinthecitylimits.ProtectionClass10indicatesaruralareawithoutfirehydrantsorfiredepartments.Class1representsthebestpublicprotection,andClass10indicatesnorecognizedprotection.•FIRM(FloodInsuranceRateMap):ItistheofficialmapofacommunityonwhichFEMAhasdelineatedboththespecialhazardareasandtheriskpremiumzonesapplicabletothecommunity.•FirstDollarCoverage:Firstdollarcoverageinhealthinsurancemeansthatyourinsurancecovershealthcareexpenseswithoutcopaymentsordeductibleshavingtobepaidfirst.Itpaysexpensesbeginningwiththefirstdollarchargedforhealthcareorhospitalizationdependingonthetypeofpolicypurchased.•FirstPartyClaim:ademandmadebyapolicyholderreportinganinsuredeventdirectlytohiscompany.•FirstPartyCoverage:Aninsurancecoverageunderwhichthepolicyholdercollectscompensationforlossesfromtheinsured'sowninsurerratherthanfromtheinsurerofthepersonwhocausedtheaccident.•Floaters:Insurancepoliciesthatcoverpropertythatcanbemovedfromonelocationtoanotherforbothtransportationperilsandperilsaffectingpropertyatafixedlocation.



•FloodInsurance:Coverageagainstlossresultingfromthefloodperil,widelyavailableatlowcostunderaprogramdevelopedbytheprivateindustryandthefederalgovernment.•FloodRelatedErosion:Thecollapseorsubsidenceoflandalongtheshoreofalakeorotherbodyofwaterasaresultofunderminingcausedbywavesorcurrentsofwaterexceedinganticipatedcyclicallevelsorsuddenlycausedbyanunusuallyhighwaterlevelinanaturalbodyofwater,accompaniedbyaseverestorm,orbyanunanticipatedforceofnature,suchasaflashfloodoranabnormaltidalsurge,orbysomesimilarlyunusualandunforeseeableeventwhichresultsinflooding.(http://www.fema.gov/flood-related-erosion)Theprocessofthegradualwearingawayoflandmasses.Erosioncanoccuralongcoastsandriversandstreams.Althoughflood-relatederosioniscoveredbyfloodinsurance,thisperilisnotcoveredperseundertheNationalFloodInsuranceProgram(NFIP).ThemappingandregulatorystandardsoftheNFIPdonotcurrentlyaddresserosion,butCommunityRatingSystem(CRS)creditisgiventocommunitiesthatincludethishazardintheirregulations,planning,publicinformation,hazarddisclosure,andfloodwarningprograms.ManyStatesandcommunitieshaveestablishedsetbacksandotherrequirementsinareassubjecttoerosion.(http://www.fema.gov/erosion)•FollowForm:Whenanumbrellapolicyprovisionfollowstheunderlyingpolicyastohowtheprovisionapplies.Followformalsoidentifiesan"excess"liabilitypolicythatfollowstheunderlyingpoliciesformostpolicyprovisions.Thepolicymaystandaloneforcertainexclusions,conditions,etc.,whilerelatingbacktotheunderlyingcoverageformostprovisions.Thistypeofpolicyformistypicallyusedexcessofscheduledunderlyinginsuranceandusuallycontainsarequirementthattheinsuredmaintainscheduledunderlyinginsurance.FollowFormcanalsobeusedwhenExcessinsuranceissubjecttoallofthetermsandconditionsofthepolicybeneathit.Intheeventofaconflict,itistheunderlyingpolicyprovisionsthattakeprecedence.Manyexcessliabilitypoliciesstatethattheyarefollowformexceptwithrespecttocertaintermsandconditions.(IRMI)•FoodContamination:"Foodcontamination"coverageprotectsyouintheeventofapatrongettingorsuspectingthattheygotfoodpoisoningfromfoodsuppliedbyyou.CheckyourcurrentpolicytoseeifyouarecoveredforFoodContaminationrisks.Foodcontaminationisoneoftherestaurantindustriesgreatestareasofrisk.•Flood:Ageneralandtemporaryconditionofpartialorcompleteinundationof2ormoreacresofnormallydrylandareaorof2ormoreproperties(atleast1ofwhichisthepolicyholder'sproperty)from:+Overflowofinlandortidalwaters;or+Unusualandrapidaccumulationorrunoffofsurfacewatersfromanysource;or+Mudflow;or+Collapseorsubsidenceoflandalongtheshoreofalakeorsimilarbodyofwaterasaresultoferosionorunderminingcausedbywavesorcurrentsofwaterexceedinganticipatedcyclicallevelsthatresultinafloodasdefinedabove.•FloodZones:FloodzonesaregeographicareasthattheFEMAhasdefinedaccordingtovaryinglevelsoffloodrisk.Thesezonesaredepictedonacommunity'sFloodInsuranceRateMap(FIRM)orFloodHazardBoundaryMap.Eachzonereflectstheseverityortypeoffloodinginthearea.ModeratetoLowRiskAreas.IncommunitiesthatparticipateintheNFIP,floodinsuranceisavailabletoallpropertyownersandrentersinthesezones:

ZoneBandX(shaded):Areaofmoderatefloodhazard,usuallytheareabetweenthelimitsofthe100-year(base-floodor1%annual-chanceofbeingequaledorexceededinanygivenyear)and500-year(0.2%annual-chanceofbeingequaledorexceededinanygivenyear)floods.BZonesarealsousedtodesignatebasefloodplainsoflesserhazards,suchasareasprotectedbyleveesfrom100-yearflood,orshallowfloodingareaswithaveragedepthsoflessthanonefootordrainageareaslessthan1squaremile.

ZoneCandX(unshaded):Areaofminimalfloodhazard,usuallydepictedonFIRMsasabovethe500-yearfloodlevel(0.2%annual-chance).ZoneCmayhavepondingandlocaldrainageproblemsthat



don'twarrantadetailedstudyordesignationasbasefloodplain.ZoneXistheareadeterminedtobeoutsidethe500-yearfloodandprotectedbyleveefrom100-yearflood.HighRiskAreas.IncommunitiesthatparticipateintheNFIP,mandatoryfloodinsurancepurchaserequirementsapplytoallofthesezones:

ZoneA:Areaswitha1%annualchanceoffloodinganda26%chanceoffloodingoverthelifeofa30-yearmortgage.Becausedetailedanalysesarenotperformedforsuchareas;nodepthsorbasefloodelevationsareshownwithinthesezones.

ZoneAE:Thebasefloodplainwherebasefloodelevationsareprovided.AEZonesarenowusedonnewformatFIRMsinsteadofA1-A30Zones.

ZoneA1-30:TheseareknownasnumberedAZones(e.g.,A7orA14).ThisisthebasefloodplainwheretheFIRMshowsaBFE(oldformat).

ZoneAH:Areaswitha1%annualchanceofshallowflooding,usuallyintheformofapond,withanaveragedepthrangingfrom1to3feet.Theseareashavea26%chanceoffloodingoverthelifeofa30-yearmortgage.Basefloodelevationsderivedfromdetailedanalysesareshownatselectedintervalswithinthesezones.

ZoneAO:Riverorstreamfloodhazardareas,andareaswitha1%orgreaterchanceofshallowfloodingeachyear,usuallyintheformofsheetflow,withanaveragedepthrangingfrom1to3feet.Theseareashavea26%chanceoffloodingoverthelifeofa30-yearmortgage.Averageflooddepthsderivedfromdetailedanalysesareshownwithinthesezones.

ZoneAR:Areaswithatemporarilyincreasedfloodriskduetothebuildingorrestorationofafloodcontrolsystem(suchasaleveeoradam).Mandatoryfloodinsurancepurchaserequirementswillapply,butrateswillnotexceedtheratesforunnumberedAzonesifthestructureisbuiltorrestoredincompliancewithZoneARfloodplainmanagementregulations.

ZoneA99:Areaswitha1%annualchanceoffloodingthatwillbeprotectedbyaFederalfloodcontrolsystemwhereconstructionhasreachedspecifiedlegalrequirements.Nodepthsorbasefloodelevationsareshownwithinthesezones.HighRisk-CoastalAreas.IncommunitiesthatparticipateintheNFIP,mandatoryfloodinsurancepurchaserequirementsapplytoallofthesezones:

ZoneV:Coastalareaswitha1%orgreaterchanceoffloodingandanadditionalhazardassociatedwithstormwaves.Theseareashavea26%chanceoffloodingoverthelifeofa30-yearmortgage.Nobasefloodelevationsareshownwithinthesezones.

ZoneVE,V1–30:Coastalareaswitha1%orgreaterchanceoffloodingandanadditionalhazardassociatedwithstormwaves.Theseareashavea26%chanceoffloodingoverthelifeofa30-yearmortgage.Basefloodelevationsderivedfromdetailedanalysesareshownatselectedintervalswithinthesezones.UndeterminedRiskAreas.

ZoneD:Areaswithpossiblebutundeterminedfloodhazards.Nofloodhazardanalysishasbeenconducted.Floodinsuranceratesarecommensuratewiththeuncertaintyofthefloodrisk.•ForcedPlacement:Insurancethatisforcedorrequiredbyabankorotherentity.•FunctionalCapacityEvaluation(FCE):isacompilationinformationthat1)objectivelyassistsinmeasuringfunctionalabilitiesandconsistencyofefforts,2)providesfurtherdataforthedeterminationofpermanentworkcapacityand3)helpstopromotesafeworkparameters.•FutureIncreaseOption:Aprovisionfoundinsomepoliciesthatallowstheinsuredtopurchaseadditionaldisabilityincomeinsuranceatspecifiedfuturedatesregardlessoftheinsured'sphysicalcondition.-G-



•GAPInsuranceORLoan/Lease(pertainingtoautos):GAPstandsfor"GuaranteedAutoProtection."Suchinsuranceisindeedimportantwhenleasingorbuyingwithasmalldownpayment,sinceyoudon'tactuallyownthecarandusuallydon'tputdownalargedownpayment.Ifyouhaveanaccident,yourinsurancewillpayyouthecurrentmarketvalueofthecar,butnotthetotalamountofwhatyouowethefinancecompany.Thisleavesagapinyourcoverage,andanamountthatyoustillhavetopay.Ifyour$20,000caristotaledinanaccident,youstillcouldoweasmuchas$5,000,evenafteryourinsurancepaysyourfinancecompany.GAPcoversthatdifference.That'sbecausecardepreciationsometimesoutpacesyourcarpayments.Soifyoubuyacarfor$20,000andputnomoneydown,thecarmightbeworthonly$14,000ayearlater,eventhoughyoustillowe$19,000.Ifanaccidenttotalsyourcar,youwillberesponsibleforpayingthe$5,000difference.Again,GAPcoversthatdifference.ToseeifyouneedGAPinsuranceforafinancedcarpurchase,considerthecoverageandthesizeofyourdownpayment.Ifyouareputtingdownlessthan20percentonyourcarpurchase,youmayneedGAPinsurance,particularlyifyoubuyacarthatdepreciatesquickly.(LookupdepreciationonEdmunds'TrueCosttoOwn).Also,lookathowyourautoinsurancepolicyiswritten.Ifitsaysthepolicywillpayoffthefullyfinancedamount,thenyoudon'tneedGAPinsurance.AlsoknownasLoan/LeaseInsurance–itcanprotectyouifyourvehicleisfinancedorleased.Ifyourvehicleistotaled,thiscoveragemaypaythedifferencebetweentheactualcashvalueofthevehicleandtheunpaidbalanceoftheloanorlease.•GeneralLiability:GeneralLiabilityinsuranceprovidescoveragethatprotectsagainst,bodilyinjury,propertydamageorpersonalinjuryclaimsmadebysomeoneelse.Somethingsthatgeneralliabilityprotectsyoufromare:

• Injuriessustainedbypatronswhileatyourrestaurant• Injuriesthatoccuroffpremisesduetoyourservices• Propertydamagecausedbyyouoryouremployees• Contractualissues• Advertising• Problemswithyourproducts

Thereareothermorespecificexposuresthatarenotcoveredbygeneralrestaurant/barliabilitycoverage.GeneralLiabilityprovidescoverageonlyforparticularinstances;lookintotheadditionalcoveragesthatcanbepurchasedtoensureyouarecorrectlyinsuredforalltheservicesyouprovide.

GeneralLiabilityvs.ProfessionalLiability:It'snotreallyaboutchoosingbetweengeneralliabilityorprofessionalliability.Ifyouhaveabusinessoracompanythatprovidesservicesoradvicetoclientsforafee,youareinneedofboth.

Similarities:Generalliabilityandprofessionalliabilityarebothsimilarinthattheyprotectabusinessfromanyliabilitythattheymightfacewithregardstoathirdpartywhowantstomakeaclaimtodosomekindofdamageorlosstheyexperienced.Thesecoverage’sprotectyoufromriskswithregardstoyourresponsibilitytoyourcustomersandtopeopleyourbusinesscomesintocontactwith.

Bothwillpayfor:



• Legaldefensecosts• Damages-thismaybeasettlementagreeduponwiththeclaimantorasajudgmentorderedand

requiredbylaw

Differences:Thedifferenceisthatprofessionalliabilityismorespecifictotheparticularprofessionbeingcovered.Generalliabilityinsuranceiseasiertoobtainanditisalsomoreorlessstandardizedacrossmosttypesofbusinesses.Professionalliabilityinsurance,ontheotherhand,ismorespecific,sincevariousprofessionshavevariousneeds.Thatiswhythistypeofinsurancealsoiscalleddifferentnames-medicalmalpractice,errorsandomissionsliabilityinsuranceandsoon.

Coverage:Generalliabilitywillprotectyourcompanyorpracticeagainstbodilyinjury,propertydamage,advertisinginjuryandpersonalinjury(fordamagesuchaslibelorslander).Meanwhile,professionalliabilitywillprotectyourbusinessorpracticeagainstitsfailuretoperformorforlossesresultingfromerrororomissionwithregardstotheproductorservicesbeingsold.Itwillalsocoveragainstpersonalinjury,breachorsecurity,breechofintellectualpropertyorwarranty.

Who'sInvolved:Withprofessionalliability,theinsuranceprotectsagainstclaimsfromclientsorcustomers.However,forgeneralliability,theinsurancewillprotectagainstawiderscopeofclaimants-notjustcustomers,butalsoofcompetitors,visitorsoreventrespassers.Inessence,itwillcoverjustaboutanyonewhocomesintocontactwithyourbusiness-throughyourproduct,throughyourbusinessofficeorareaoreventhroughyouradvertisingcampaigns.

KindofDamageCovered:Forgeneralliabilityinsurance,thedamagebeingprotectedagainstisusuallybodilyinjuryordamagetoproperty.Anotherareaofdamagemayalsobedamagetoapersonorcompanybyyourbusinesses'claimsorlibelousstatements.Forprofessionalliabilityinsurance,thedamagebeingprotectedagainstisusuallyfinancialinnature-afinanciallossthatresultedinbadadviceorserviceyoufailedtoprovidetheclient.•GeneralLiabilityAggregate:Liabilityinsuranceavailableforeachyearasatotal(Forexample,4lawsuitsat$250,000eachwouldbethemax[1Maggregate])\-ofcourse,youcangetmorecoverageifyouwish.•GeneralLiabilityInsurance:Coveragethatpertains,forthemostpart,toclaimsarisingoutoftheinsured'sliabilityforinjuriesordamagecausedbyownershipofproperty,manufacturingoperations,contractingoperations,saleordistributionofproducts,andtheoperationofmachinery,aswellasprofessionalservices.•GlassInsurance:Protectionforlossofordamagetoglassanditsappurtenances.•GracePeriod:Aspecifiedperiodafterapremiumpaymentisdue,inwhichthepolicyholdermaymakesuchpayment,andduringwhichtheprotectionofthepolicycontinues.•GrossNegligence:theintentionalfailuretoperformamanifestdutyinrecklessdisregardoftheconsequencesasaffectingthelifeorpropertyofanother•GroupInsurance:Insurancewrittenonanumberofpeopleunderasinglemasterpolicy,issuedtotheiremployerortoanassociationwithwhichtheyareaffiliated.•GuarantyFund:Afund,derivedfromassessmentsagainstsolventinsurancecompanies,toabsorblossesofclaimantsagainstinsolventinsurancecompanies.

-H-•Hazard:Conditionthatcreatesorincreasesthechanceofloss.



•HealthMaintenanceOrganization(HMO):Anorganizationthatprovidesawiderangeofcomprehensivehealthcareservicesforaspecifiedgroupatafixedperiodicpayment.TheHMOcanbesponsoredbythegovernment,medicalschools,hospitals,employers,laborunions,consumergroups,insurancecompanies,andhospitalmedicalplans.•HighRiskAutomobileInsurer:Companythatspecializesininsuringmotoristswhohavepoordrivingrecordsorhavebeencanceledorrefusedinsurance.•Hired/Non-OwnedVehicleLiability:Hired/Non-OwnedVehicleLiabilitycoverageprovidescontingentexcessliabilityforHired(rented)vehiclesandNon-Ownedvehicles(vehiclesownedbyemployeesanddrivenforcompanybusiness.)Hired/Non-OwnedVehicleLiabilitylimitsarethesameastheGeneralLiabilitypolicy.Hired&Non-ownedcoverageisessentialforrisksthathaveadeliveryserviceasyoucanbeheldresponsibleforaccidentsthatyouremployeesgetinto.Notethathiredautosarealmostalwaysinsuredonanexcessbasis.Thismeansthattheinsurerwillpayonlyafteranyotheravailableinsurance,suchasthedriver’spersonalautopolicy,hasbeenusedup.Modernsocietyisdependentonautos,andfewbusinessescanfunctionwithoutthem.Yet,manysmallbusinessesdonotownanyvehicles.Instead,theyrelyonautosthatbelongtocompanyprincipals,employeesorotherparties.Vehiclesthatyourcompanydoesnotownbutthatitusesforbusinesspurposesarecallednon-ownedautos.Non-ownedautosmaybeinsuredforliabilityunderacommercialautopolicy.WhatareNon-ownedAutos?Underthestandardcommercialautopolicy,non-ownedautosaredefinedintermsofwhattheyarenot.Non-ownedautosmeans"autosyoudonotown,lease,hire,rentorborrowthatareusedinconnectionwithyourbusiness".Autosthatyoulease,hire,rentorborrowareconsideredhiredautos.Thus,non-ownedautosarevehicleotherthanthoseyou(thenamedinsured)ownorhire.Non-ownedautosincludevehiclesusedinyourbusinessthatareownedbyyouremployees,partners,members(ifyouarealimitedliabilitycompany)ormembersoftheirhouseholds.Somebusinessesmakeextensiveuseofvehiclesownedbyemployees.Forinstance,acompanymayemployalargesalesforceandrequireallsalesemployeestodrivetheirownautoswhenmakingsalescallsonclients.Otherbusinessesrelyonemployee-ownedvehiclesonlyoccasionally.Nomatterhowoftenyourcompanyusesthem,itisimportanttomakesurethatnon-ownedautosarecoveredunderyourcommercialautopolicy.Thetermnon-ownedautomayincludeavehicleownedbyvirtuallyanyoneaslongasitisusedinyourbusiness.Forexample:

• Volunteersforyourcharitableorganizationusetheirpersonalautostoferryelderlypeoplefromtheirhomestodoctorappointments.

• Membersofyourcompany,aprofessionalassociation,usetheirpersonalautostoconductassociationbusiness.

• Anemployeeofyoursdrivestoworkusinghisneighbor'scarbecausetheemployee'scarisintheshop.Laterthatday,yousendtheemployeeonabusiness-relatederrand(buyingstampsatthepostoffice)andtheemployeecomplies,usingthevehicleheborrowedfromhisneighbor.

• Acustomerofyourswillsoonarriveattheairportbutneitheryounoryourbusinesspartnerisavailabletomeethim;thus,yourpartneraskshisfriend(Bill)topickupthecustomerusingBill'svehicle.

Noneoftheautosdescribedaboveisownedorhiredbythebusiness.Becausetheyareusedonbehalfofthebusiness,allareconsiderednon-ownedautos.VicariousLiability



Howcouldyoubeliableforaccidentsinvolvingautosthatdon'tbelongtoyou?Theanswerhastodowithvicariousliability.Asanemployer,youmaybeheldvicariouslyliablefornegligentactscommittedbyyouremployees.Thisliabilityextendstoautoaccidentsyouremployeesinadvertentlycausewhileperformingtheirjobs.Youmayalsobeheldliableforaccidentscausedbypeoplewhoarenotemployees(suchasthepartner’sfriendintheaboveexample),iftheyaredrivinganon-ownedvehicleforthebenefitofyourbusiness.WhoisanInsured?Youmayelecttoinsurenon-ownedautosforliabilityunderyourcommercialautopolicy.Ifyouhavepurchasedthiscoverage,onlyyou(thenamedinsured)arecoveredforclaimsarisingoutofautoaccidentsinvolvingnon-ownedautos.Nooneelseiscovered.Thismeansthatyouremployeesarenotinsuredsunderyourpolicywhiledrivingtheirpersonalautosonyourcompany’sbehalf.Forexample,supposethatBarbara,anemployeeofyours,isrunninganerrandforyouusingherpersonalauto.Barbarahascompletedthetaskandisonherwaybacktoyourofficewhensherunsastopsign.Barbarabroadsidesanothercar,injuringitsdriver.ThedriverlatersuesbothBarbaraandyourcompany.Assumingyourcommercialautopolicycoversnon-ownedautos,theclaimagainstyourcompanyshouldbecovered.However,Barbarawillhavetorelyonherownpersonalautopolicytocovertheclaimagainsther.EmployeesasInsuredsYoucanelecttocoveryouremployeesunderyourpolicyasinsuredsfortheiruseofnon-ownedautos.AnendorsementcalledEmployeesasInsuredsisavailableforthispurpose.Theendorsementwillcoveremployeesofyoursforclaimsarisingoutofaccidentsthatoccurwhileemployeesaredrivingtheirpersonalvehiclesoncompanybusiness.Unfortunately,theendorsementappliesasexcesscoverageovertheemployee’spersonalautopolicy.Whyisn’ttheendorsementprimary?ThestandardISOcommercialautopolicystatesthatitprovidesexcessliabilitycoverageforanyautoyoudon’town.Theendorsementdoesnotaffectthisprovision,sothecoverageitaffordsappliesonanexcessbasis.SuggestedReading

• Who'sCoveredUnderMyCommercialAutoPolicy?• QuestionstoAskBeforeYourBusinessRentsanAuto

•HoldHarmlessClause:Clausewrittenintoacontractbywhichonepartyagreestoreleaseanotherpartyfromalllegalliability,suchasaretailerwhoagreestoreleasethemanufacturerfromlegalliabilityiftheproductinjuressomeone.•HomeownersPolicy:Apackageofinsuranceprovidinghomeownerswithabroadrangeofpropertyandliabilitycoverage’s.•Hurricane:Atropicalstormmarkedbyextremelylowbarometricpressureandcircularwindswithavelocityof75milesanhourormore.-I-•IMO/FMO(Insurance/IndependentorFieldMarketingOrganization):Marketingorganizationsthatusuallydealwithagentsinthelifeinsurance,fixedandindexedannuitiesfields.•ImputedNegligence:Caseinwhichresponsibilityfordamagecanbetransferredfromthenegligentpartytoanotherperson,suchasanemployer.•Indemnification:Compensationtothevictimofaloss,inwholeorinpart,bypayment,repair,orreplacement.•Indemnity:Legalprinciplethatspecifiesaninsuredshouldnotcollectmorethantheactualcashvalueofalossbutshouldberestoredtoapproximatelythesamefinancialpositionasexistedbeforetheloss.



•IndependentAdjustor:Claimsadjustorwhooffershisorherservicestoinsurancecompaniesandiscompensatedbyafee.•IndependentAgent:anindependentbusinesspersonwhousuallyrepresentstwoormoreinsurancecompaniesinasalesandservicecapacityandwhoispaidonacommissionbasis.•IndependentMedicalExamination(IME):Amedicalexaminationusedtodeterminewhetheraninjuredpartyclaiminginjuriesisactuallyinjuredortotheextenttheyclaim.Independentmedicalexaminersareregisteredmedicalpractitionerswhoprovideimpartialmedicalassessmentsofaninjuredworkertoassistdecisionsabout:acceptingaclaim,ongoingliabilityandtheworker’sleveloffitnessforwork.•InlandMarineInsurance:Abroadformofinsurance,generallycoveringarticlesintransitaswellasbridges,tunnelsandothermeansoftransportationandcommunication.Besidesgoodsintransit(generallyexceptingtrans-ocean),itincludesnumerous"floater"policies,suchasthosecoveringpersonaleffects,personalproperty,jewelry,furs,finearts,andotheritems.•Inservant:Apersonemployedtoworkforanother,especiallyonewhoperformshouseholdduties.•InspectionReport:Areport(usuallywritten)ofaninvestigationofanapplicant,conductedbyanindependentagencythatspecializesininsuranceinvestigations.Thereportcoverssuchmattersasoccupation,financialstatus,healthhistory,andmoralproblems.•Insurability:Acceptabilitytothecompanyofanapplicantforinsurance.•InsurableRisk:Theconditionsthatmakeariskinsurableare(a)theperilinsuredagainstmustproduceadefinitelossnotunderthecontroloftheinsured,(b)theremustbealargenumberofhomogeneousexposuressubjecttothesameperils,(c)thelossmustbecalculableandthecostofinsuringitmustbeeconomicallyfeasible,(d)theperilmustbeunlikelytoaffectallinsuredssimultaneously,and(e)thelossproducedbyariskmustbedefiniteandhaveapotentialtobefinanciallyserious.•Insurance:Asystemunderwhichindividuals,businesses,andotherorganizationsorentities,inexchangeforpaymentofasumofmoney(apremium),areguaranteedcompensationforlossesresultingfromcertainperilsunderspecifiedconditions.•InsuranceCompany:Anorganizationcharteredtooperateasaninsurer.Anycorporationprimarilyengagedinthebusinessoffurnishinginsuranceprotectiontothepublic.•InsuranceCoverageAbbreviations:ACVActualCashValueAIPAutomobileInsurancePlanAPAdditionalPremiumBIBodilyInjuryBIBusinessInterruptionBOPBusinessOwner’sPolicyBVBrickVeneerCGLCommercialGeneralLiabilityCOLLCollisionCOMPComprehensiveCoverageorCompensationasinWorkers’CompensationCXCancelledD&BDunn&Bradstreet,Inc.D&ODirectors&OfficersDEDDeductibleDICDifferenceinConditionsDPDepositPremiumDPPDeferredPremiumPaymentPlanECExtendedCoverageE&OErrors&OmissionsGAGeneralAverage



GKLLGarageKeepersLegalLiabilityGLGeneralLiabilityHOHomeownersINCLIncludedM&CManufacturers&ContractorsMPMinimumPremiumMVMasonryVeneerMVRMotorVehicleReportNANotApplicableNOCNotOtherwiseClassifiedorNoticeofCancellationO&CPOwners&ContractorsProtectionOL&TOwnersLandlords&TenantsP&CProperty&CasualtyPDPropertyDamagePIPPersonalInjuryProtectionPRCProRataCancellationRCReplacementCostSRCShortRateCancellationUMUninsuredMotoristV&MMVandalism&MaliciousMischiefWCWorkersCompensation•InsuranceGuarantyFunds:StateFundsthatprovideforthepaymentofunpaidclaimsofinsolventinsurers.•InsuranceOrganizations&PeriodicalsAbbreviations:ARIAAmericanRisk&InsuranceAssociationFC&SFireCasualty&SuretyBulletinsIIAInsuranceInstituteofAmericaIIAAIndependentInsuranceAgentsofAmericaIIIInsuranceInformationInstituteISOInsuranceServicesOfficeNAICNationalAssociationofInsuranceCommissionersNAIWNationalAssociationofInsuranceWomenRIMSRisk&InsuranceManagementSociety•InsuranceServicesOffices(ISO):Majorratingorganizationinpropertyandliabilityinsurancethatdraftspolicyformsforpersonalandcommerciallinesofinsuranceandprovidesratedataonlosscostsforpropertyandliabilityinsurancelines.•Insured:Apersonororganizationcoveredbyaninsurancepolicy,includingthe"namedinsured"andanyotherpartiesforwhomprotectionisprovidedunderthepolicyterms.•Insurer:Thepartytotheinsurancecontractwhopromisestopaylossesorbenefits.Also,anycorporationengagedprimarilyinthebusinessoffurnishinginsurancetothepublic.•IntellectualProperty(IP):IntellectualPropertyInsurancecoverageprotectscompaniesforcopyright,trademarkorpatentinfringementclaimsarisingoutofthecompany'soperation.Itpaysthedefensecostsandanyjudgmentuptothepolicylimits.-J-•Joint-and-SeveralLiability:Alegalprinciplethatpermitstheinjuredpartyinatortactiontorecovertheentireamountofcompensationdueforinjuriesfromanytort-feasorwhoisabletopay,regardlessofthedegreeofthatparty'snegligence.



•JointTenants:Aformofjointpropertyownershipwithrightofsurvivorship,i.e.,inwhichthesurvivorsautomaticallyowntheshareofadeceasedco-owner.•JointUnderwritingAssociation:Oneofseveraltypesof"sharedmarket"mechanismsusedtomakeautomobileinsuranceavailabletopersonswhoareunabletoobtainsuchinsuranceintheregularmarket.JUAsalsohavebeencreatedinsomestatestohelpalleviateavailabilityproblemsinthefieldsofmedicalmalpracticeandcommercialinsurance.•JointUnderwritingAssociation:Adeviceusedtoprovideinsurancetothosewhocannotobtaininsuranceinthevoluntarymarket.Certaincompanies(calledcarriers)issuepoliciesatoneratelevelandhandleclaims,buttheultimatecostsarebornebyallcompanieswritinginsuranceinthatstate.•JudicialBond:Typeofsuretybondusedforcourtproceedingsandguaranteeingthatthepartybondedwillfulfillcertainobligationsspecifiedbylaw,forexample,fiduciaryresponsibilities.-K-•K&R(Kidnap&RansomInsurance):Kidnap,RansomandExtortioninsuranceprovidesnumerousbenefitsandservicestotheapplicantandtheinsured.Kidnap,Ransom&ExtortionInsuranceprovidescoverageforkidnappingsandothereventsthroughacombinationoffinancialindemnificationandexpertcrisismanagement.Abasicpolicycancoveritemssuchasransompayment,lossofincome,interestonbankloans,andmedical/psychiatriccare.Besidesinsurance,companiescanalsoutilizecrisismanagementteamsandemployeetraininginwhattodoinahostagesituationtominimizelossesduetokidnaporransom.TheKidnap,RansomandExtortioninsurancecoversnamedemployeesforindividualoraggregateamounts,withdeductiblesrequiringtheinsuredtoparticipateinabout10%ofanyloss.KidnapExtortionandDetentionarerealdangersforcompaniesoperatingbothoverseasandindomesticmarkets.Theyareoftenoverlookedbymanagementonthegroundsthat“itwon'teverhappentous”,butthedamagethiscaninflictonabusinesscanbeverysevere-astheannualrollcallofcorporateandindividualvictimsaroundtheworldtestifies.Withover1,000annualkidnappingsofprofessionalsandexecutivesworldwideandnumerousterroristsattacks,lifeandhealthinsuranceprofessionalsshouldconsidersuchpoliciesforanyonewhotravelsinternationally.ThosepersonswhoareperceivedtobewealthyneedKidnapandRansomInsurance.Noteveryonegenerallyneedsit.Akidnappers’perceptionofvictim’sliquidassetsmayhavelittletodowiththerealvalueofthevictim’sassets.Forpeoplewhotravelfrequentlytohigh-riskregionssuchasColumbiaandPeru,thiscoveragecouldbealifesaver.KidnapandRansominsuranceplansprovideassistancetothefamilyandbusinesswithregardtoindependentinvestigations,negotiations,arrangementanddeliveryoffunds,andnumerousotherservicesvitaltoasafe,speedyandsatisfactoryresolution.Extortionistsdon’tdiscriminate.Anycompanyofanysizecanbeatargetforextortionthreatsagainstthecompanyanditsemployees.Peopletendtoassociatebusinessextortionandkidnappingwithglobalcompanies.Thefactis,radicalgroupsandcriminalsexisteverywhere.



Kidnap,RansomandExtortionInsurancewillhelpyoumanagethecostsassociatedwithanextortionthreatagainstyourproducts,proprietaryinformation,computersystemoryourpeoplecanbeenoughtopushasmalltomedium-sizedcompanytoitsfinanciallimits.Theserisksmaynotfeellikeeverydayexposures,buttoooftentheyare.Andwhentheyhappen,youmayneedfinancialassistancetomeetextortiondemandsandtheextensivecostsassociatedwithnegotiationandrecovery.Duetoglobalizationofeconomies,multinationalcompaniesneedtoprepareforthepossibilityofattacksontheiremployeesandfacilitiesvirtuallyanywhereintheworld.•KeyManInsurance(akaKeypersonorKeyman):Animportantformofbusinessinsurance.Ingeneral,itcanbedescribedasaninsurancepolicytakenoutbyabusinesstocompensatethatbusinessforfinanciallossesthatwouldarisefromthedeathorextendedincapacityofthememberofthebusinessspecifiedonthepolicy.Thepolicy’stermdoesnotextendbeyondtheperiodofthekeyperson’susefulnesstothebusiness.Theaimistocompensatethebusinessforlossesandfacilitatebusinesscontinuity.Keypersoninsurancedoesnotindemnifytheactuallossesincurredbutcompensateswithafixedmonetarysumasspecifiedontheinsurancepolicy.Anemployermaytakeoutakeypersoninsurancepolicyonthelifeorhealthofanyemployeewhoseknowledge,work,oroverallcontributionisconsidereduniquelyvaluabletothecompany.Theemployerdoesthistooffsetthecosts(suchashiringtemporaryhelporrecruitingasuccessor)andlosses(suchasadecreasedabilitytotransactbusinessuntilsuccessorsaretrained)whichtheemployerislikelytosufferintheeventofthelossofakeyperson.-L-•LandInsurance:Landinsuranceisaformofpropertycoveragethatwillcoveraclaimofbodilyinjuryorpropertydamageifsomeonehasanaccidentonyourpropertyandyouarefoundtobeatfault.Ifsomeonefilesalawsuitagainstyou,itwillalsohelptocoveryourlegalfees.Whileitcannotcoveranydamagethathappenstoyourland,itwillprotectyoufinanciallyifothersareeveronyourproperty.(c/oTrustedChoice.com)•LandslideTypes/Classifications:Toexplaincause-and-effectdifferencesinslopefailures,geologistshaveclassifiedlandslidesbythetypeofmovementandthesizeofthematerialinvolved:Slidesconsistofblocksofmaterialmovingonwell-definedshearplanes.Theyaredividedintorotationalslidesthatmovealongaconcavesurfaceandtranslationalslidesthatmoveparalleltothegroundsurface.Fallsarethesuddenreleaseofrocksorsoilsdroppingfreelythroughtheairwithlittlecontactwithothersurfacesuntilimpact.Topplesaresimilartofallsexceptthattheinitialmovementinvolvesaforwardrotationofthemass.Flowsmoveentirelybyshearingwithinthetransportedmassandactlikeviscousfluids.Creepisthealmostimperceptiblemovementofmaterialdownaslope.Lateralspreadsoccurwhenliquefactioninunderlyingmaterialscausessurfacerocksorsoilstomovedowngentleslopes.•Lapse:Theterminationordiscontinuanceofaninsurancepolicyduetononpaymentofapremium.•LapsedPolicy:Apolicyterminatedfornon-paymentofpremiums.Thetermissometimeslimitedtoaterminationoccurringbeforethepolicyhasacashorothersurrendervalue.•Larceny-theft:Theunlawfultaking,carrying,leadingorridingawayofanotherperson'sproperty.•LastClearChanceRule:Statutorymodificationofthecontributorynegligencelawallowingtheclaimantendangeredbyhisorherownnegligencetorecoverdamagesfromadefendantifthedefendanthasalastclearchancetoavoidtheaccidentbutfailstodoso.



•Lessor’sRiskOnly(LRO)orLandlordInsurancePolicy:Whenleasingabuildingtoothers,itisimportanttoprotectyourinvestmentinanywaythatyoucan.Whileyoumayhaveotherinsurancetocoveryourproperty,andyourlessee(tenant)mayhavethesame,lessor'sriskinsuranceisagreatwaytomakesurethatyourpropertyisprotectedagainstanypossibledamage.Lessor'sriskinsuranceisalsoknownaslandlord'sinsurance,andmayberequiredinyourarea.

• Function-Lessor'sriskinsuranceprovidesliabilityandpropertycoverageforindividualswholeasetheirbuildingtoothers.Ifyouoccupylessthan75percentofyourbuilding,andleasetheremainderofit,youmayalsoqualifyforlessor'sriskinsurance.Checkwithyourlocalinsuranceagenttofindoutwhetheryouqualifyforthisinsurance,andyourpremiumeligibility.

• Types-Alllessor'sriskinsuranceisdesignedtoprotectyouforliabilityandpropertydamage.Ifyourequiremoreprotection,itispossibletoexpandyourcoverageintootherareas,suchasbodilyinjuryandpollutionliability.Theseadditionalfunctionswillraiseyourinsurancepremium,socheckwithyourinsuranceagenttofindoutwhethertheseexpansionsarerightforyou.

• Function-Yourlessor'sriskinsurancepolicycoversthebuildingthatyouareleasingout,soyourtenantsmayalsobenefitfromtheinsurance.Incaseofdamagetothebuilding,yourtenantscanbeassuredthattheinsurancewillcoverrepairstotheirspaceinatimelymanner.Assuch,itisrecommendedtocarrylessor'sriskinsuranceevenifnotrequiredinyourarea,asitwillprovideanattractivebenefittopotentiallessees.

•Liability:Anylegallyenforceableobligation.•LiabilityInsurance:Insurancecoveringthepolicyholder'slegalliabilityresultingfrominjuriestootherpersonsordamagetotheirproperty.Providesprotectionfortheinsuredagainstlossarisingoutoflegalliabilitytothirdparties.Liabilityinsuranceprotectsyourbusinessifalawsuitisfiledforemployeeorbusinessnegligence.Dependingonthetypeofworkyoudo,yourstatemayalsorequireyoutopurchaseprofessionalliabilitywhichprotectsyouagainstmalpractice,errorsandnegligence.Liabilityinsuranceprotectsyourcompanyincaseitissuedorheldlegallyliableforinjuryorlosscausedbyamistakemadebyyourcompany.•LiabilityLimits:Thestipulatedsumorsumsbeyondwhichaninsurancecompanyisnotliabletoprotecttheinsured.•LiabilityWithoutFault:Principleonwhichworkerscompensationisbased,holdingtheemployerabsolutelyliableforoccupationalinjuriesordiseasesufferedbyworkers,regardlessofwhoisatfault.•LifeAnnuity:Afinancialcontractintheformofaninsuranceproductaccordingtowhichaseller(issuer)—typicallyafinancialinstitutionsuchasalifeinsurancecompany—makesaseriesoffuturepaymentstoabuyer(annuitant)inexchangefortheimmediatepaymentofalumpsum(single-paymentannuity)oraseriesofregularpayments(regular-paymentannuity),priortotheonsetoftheannuity.Thepaymentstreamfromtheissuertotheannuitanthasanunknowndurationbasedprincipallyuponthedateofdeathoftheannuitant.Atthispointthecontractwillterminateandtheremainderofthefundaccumulatedisforfeitedunlessthereareotherannuitantsorbeneficiariesinthecontract.Thusalifeannuityisaformoflongevityinsurance,wheretheuncertaintyofanindividual'slifespanistransferredfromtheindividualtotheinsurer,whichreducesitsownuncertaintybypoolingmanyclients.Annuitiescanbepurchasedtoprovideanincomeduringretirement,ororiginatefromastructuredsettlementofapersonalinjurylawsuit.•LifetimeDisabilityBenefit:Abenefittohelpreplaceincomelostbyaninsuredpersonaslongashe/sheistotallydisabled,evenforalifetime.Disabilityincomepayableforthelifeoftheinsuredaslongasheistotallydisabled.•LOI(LimitofIndemnity):Thelimitofindemnityisthemaximumamounttheinsurerwillpayforcompensationandclaimant’scostsandexpensesarisingfromanyoneclaimandallclaimsintheaggregatemadebytheinsuredunderapolicyduringtheperiodofinsurance.•Liquidation:Dissolvingacompanybysellingitsassetsforcash.



•LiquorLiability:LiquorLiabilitycoverageisforbodilyinjuryorpropertydamagecausedbyanintoxicatedpersonwhowasservedliquorbythepolicyholder.Liquorliabilityinsuranceprovidescoverageforbodilyinjuryorpropertydamageforwhichaninsuredmaybeheldliablebyreasonofthefollowing:

• Causingorcontributingtotheintoxicationofanyperson;• Furnishingalcoholicbeveragestoapersonunderthelegaldrinkingageorundertheinfluenceof

alcohol;or• Violatinganystatute,ordinance,orregulationrelatingtothesale,gift,distribution,oruseof

alcoholicbeverages.

Thiscoverageappliesonlyiftheinsuredisinvolvedinthefollowingactivities:

• Manufacturing,selling,ordistributingalcoholicbeverages;• Servingorfurnishingalcoholicbeveragesforacharge,whetherornotsuchactivityrequiresa

licenseorisforthepurposeoffinancialgainorlivelihood;or• Servingorfurnishingalcoholicbeverageswithoutacharge,ifalicenseisrequiredforsuch

activity.

Liquorliabilityinsuranceisbusinessinsurancethatprotectsyourbusinessagainstlossordamagesclaimedasaresultofapatronofyourbusinessbecomingintoxicatedandinjuringthemselvesorothers.Ifyourbusinessmanufactures,sells,serves,orfacilitatestheusesorpurchaseofalcohol,thenyourbusinessmayneedthiscoverage.

Liquorliabilitycoveragemaybesoldasanadd-ontoacommercialliabilitypolicyorasaseparateliabilitypolicy.But,ifyoudonotpurchasethisextracoverageyourstandardliabilitypolicyDOESNOTprotectyourbusinessagainstthesekindofclaims.

Thiscoverageisexpensive-dependingonyourlocation-anditisestimatedbyexpertsthatonly35%ofbusinessesthatshouldhavethiscoverageactuallypurchasethiscoverage.Partofthisisbecauseofmisconceptionsthatexistinthehospitalityindustryregardingtheindustry'sliabilityrisksforintoxicatedpatrons.Thatissueisatopicinitself.Partofthisisbecausetheinsurerscontinuallyaddexclusionstothepointthatthiscoverageisseenashavingnovalue.

Ifyouliveinastatewitha"dramshopliability"statute,thenpurchasethisinsuranceifyourbusinesswillmanufacture,sell,serve,orfacilitatetheuseofalcohol.

Whattolookfor/askforinaliquorliabilitypolicy:

• AssaultandBatteryCoverage-Mostclaimsagainstbarsandrestaurantsaretheresultsoffights.Yourliquorliabilitypolicyshouldincludecoverageforassaultandbatteryclaims.Ifnot,thepolicyhasamuchlowerrealvalue.

• DefenseCostsIncluded-Thebiggestcostfacingyourbusinessinthesetypesofclaimsisthecostofretainingalawyeragainstfrivolousclaims.Insurersknowthis.Thatiswhytheysellpolicieswhere"defensecosts"aredeductedfromthetotalcoverage.Thatis,your$500,000policyisreducedto$400,000becauseof$100,000inattorneys'fees.Frankly,evenwithalowerpremium,passonthepolicyifitdoesnotprovideyourbusinesswithskilled,appointedlegalcounselthatdoesnotreducecoverage.



• EmployeesIncluded-Ifyouserve,thenemployeeswilldrinkregardlessoftherules.Insurers

knowthisandsometimesexcludeemployeesfromcoverage.Makesureemployeesarecoveredaspatrons.

• DamageDefinitionIncludesMentalDamages-Claimantsmayclaimtheyweredamagedinnon-physicalways:stress,mentalanguish,orpsychologicaldamage.Somepoliciesexcludethesetypesofdamages.Don'tpurchaseapolicywithlimiteddamagedefinitions.

• ReducedPremiumsBasedonSafetyandClaims-Goodinsurerswhoaremarketleadersinbarandrestaurantinsurancewillofferfreeclassesandtrainingtotheirinsuredsemployeesanddiscountsonpremiumsforhavingsafetytrainingandnoclaimhistory.Someinsurerswillreducepremiumsby15-20%forthisbasicsafetytraining.

Asafinalnote,liquorliabilityinsuranceWILLNOTcoversalesthatarecontrarytolawandsalestominors.SocialHostsandLiquorLiability-Ahsummer!Warmweather,sunnybeachesandfamilyvacations.Anothersummertraditionisthecompanypicnic.Employeesgatherinalocalparkorintheboss'sbackyardtoeathotdogsandplaysillygames.Andwhat'sacompanypicnicwithoutbeer?Unfortunately,liquorservedatacompany-sponsoredeventcancreateliabilityforyourfirmasasocialhost.Somestateshavepassedlawsregarding"socialhosts",meaningindividualsthatprovidealcoholtoothersatsocialevents.Mostoftheselawsaredirectedatminors.Theselawscancreateliabilityforbusinessesthatserveliquoratsocialeventswhereminorsarepresent.Forexample,supposeyourfirmsponsorsapicnicforemployeesandtheirfamilies.Anemployee'steenagedsondrinksbeerattheeventandbecomesintoxicated.Helatercausesanautoaccidentinwhichanotherdriverisinjured.Dependingonthestatelaw,yourfirmcouldbesubjecttolegalsanctionsinadditiontoanegligencesuit.•Long-TermDisabilityIncomeInsurance:Insuranceissuedtoanemployer(group)orindividualtoprovideareasonablereplacementofaportionofanemployee'searnedincomelostthroughseriousandprolongedillnessorinjuryduringthenormalworkcareer.(SeealsoIntegration.)•Loss:Thehappeningoftheeventforwhichinsurancepays.•LossAssessment:Apropertyowner'sshareofalosstopropertyownedincommonbyallmembersofapropertyownersassociation.Homeowner’spoliciesandcondominiumunitowner’spoliciestypicallyprovideasmallamountofcoverageforsuchassessments,withadditionalamountsavailablebyendorsementforanadditionalpremium.•LossofRents:Ifyouownrentalproperty,orarethinkingaboutinvestinginrealestate,rentlossinsurancecanhelpensurethatanaccidentornaturaldisasterdoesnotemptyyourbankaccount.Rentlossinsurancecanhelpwhenyouneeditthemost.

• WhatisRentLossInsurance?-Rentlossinsuranceisapolicythatcoversarentalpropertyownerfromlossinrentalvalueduetodamage.

• Coverage-Thereare,ofcourse,severalrentlosspoliciesfromwhichtochoose.Generally,rentlossinsurancecoversexternalhazardssuchasfire,fallingtrees,floodsandothercalamitiesforatleastsixmonthsthattheunitisuninhabitable.Rentlossinsurancecoversyourpropertydamageaswellasanylostrentalincomefromthedamagedunit(s).Manytimesrentlossinsuranceisofferedaspartofacomprehensiveinsurancepolicyforlandlords.

• Factors-Theamountofrentlosscoveragedependsonyournetoperatingloss.Netoperatinglossiscalculatedbysubtractingtaxes,maintenancecosts,utilitiesexpenses,mortgagepaymentsandinsurancepremiumsfromyourmonthlyrentalincome.



• IsRentLossInsuranceMandatory?-Manymortgagecompaniesrequireyoutohaverentloss

insurancewhenyoupurchaseyourrentalproperty.Ifrentcollectionsisyourmainsourceofincomeformakingyourrentalproperty'smortgagepayments,itiswisetopurchasethisinsuranceregardlessofyourlender'srequirements.

• RentLossDuetoaTenantDefaultingonRentPayments-Anothertypeoflandlordinsurancepolicy,rentguaranteeinsurance,coverslossofrentduetotenantnon-payment.Mostinsurancecompanieshavecomprehensiveinsuranceplansforlandlordsthatencompassbothrentlossandrentguaranteepolicies.

•LossRatio:Thepercentwhichlossesbeartopremiumsforagivenperiod.Theratioofclaimstopremiums.Itmaybecalculatedinseveraldifferentways,usingpaidpremiumsorearnedpremiums,andusingpaidclaimswithorwithoutchangesinclaimreservesandwithorwithoutchangesinactivelifereserves.•LossReserve:Theamountsetupastheestimatedcostofaclaim.(SeeIBNRReserve)•LossRuns:Lossrunsarereportsthatdetailtheinsuranceclaimsanindividualorabusinesshashadduringaparticulartimeframe.Theyareusedbothasanupdatefortheinsuredandasanunderwritingtooltohelpinsurancecompaniesmakedecisionsaboutwhethertocontinuewritinginsurancefortheclientornot.Theyarealsousedtoassesstherisklevelofapotentialnewclientforaninsurancecompany.

WhatDoLossRunsContain?Lossrunsbeginbygivingbasicinformationaboutthepolicyholderliketheirname,addressandeffectivedatesoftheirpolicies.Theytypicallycontainlossinformationforthecurrentyearandthelast3to5years.Belowisalistofinformationlossrunsusuallyprovideabouteachclaim:

• Dateoftheloss• Datetheclaimwasreported• Nameoftheclaimant• Synopsisofwhathappened• Amountpaidtodate• Reserveamountthathasbeensetaside• Whethertheclaimisclosedorstillopen

•LowSpeedVehicles(LSV):LSVsareasmall,butgrowingnicheofvehiclesthatfitsomewherebetweengolfcartsandpassengervehicles.

-M-•Malingering:Thepracticeoffeigningillnessorinabilitytoworkinordertocollectinsurancebenefits.•Malpractice:Impropercareortreatmentbyaphysician,hospital,orotherproviderofhealthcare.•MalpracticeInsurance:Coverageforaprofessionalpractitioner,suchasadoctororalawyer,againstliabilityclaimsresultingfromallegedmalpracticeintheperformanceofprofessionalservices.•ManagedCare:Healthcaresystemsthatintegratethefinancinganddeliveryofappropriatehealthcareservicestocoveredindividualsbyarrangementswithselectedproviderstofurnishacomprehensivesetofhealthcareservices,explicitstandardsforselectionofhealthcareproviders,formalprogramsforongoingqualityassuranceandutilizationreview,andsignificantfinancialincentivesformemberstouseprovidersandproceduresassociatedwiththeplan.•ManifestationProvision:TheManifestationClauserestrictstheOccurrencecoveragebystatingthatthedamagemustmanifestduringthepolicyperiodtobeconsideredanoccurrence.Thebodilyinjuryorpropertydamagemustfirstmanifestduringthepolicyperiod.Theinsurancedoesnotapplytoanybodily



injuryorpropertydamagethatiscontinuousorprogressivelydeterioratingandthatfirstmanifestedpriortotheeffectivedateofthepolicyoraftertheexpirationofthepolicy,evenifsuchinjuryordamagecontinuedordeterioratedduringthetimeofthepolicy,andwhetherornotsuchoccurrenceisknowntoanyinsured.Ifthedateofthefirstbodilyinjuryorpropertydamagecannotbedetermined,thenusuallythedateoffirstdamageorinjuryshallbedeemedtobetheearliestdateonwhichtheprocess,whichledtothebodilyinjuryorpropertydamagebegan.Regardlessofthepolicy’sexactdefinition,thedamagecanonlyFIRSTmanifestonceandsoonlythepolicyinwhichitfirstmanifestswillhaveanobligationtopay.Theoccurrenceofdamagehastohavebecomeknown(ormadeevident,orobvious)duringthepolicyperiod.Thisformwouldnotwanttocoverasituationwherethedamagebecameapparentafterthepolicyperiodevenifthedamageoccurredduringthepolicyperiodandtheyoftenrequirethatthedamagebeobviouslyapparent.Thatis,unlikeafulloccurrencepolicy,themanifestationpolicydoesn’twanttosendoutateamofscientiststodeterminewhetherornottherewasamicroscopiccrackinapipeduringthepolicyperiodthatcauseddamagetooccuratalaterdate.Themanifestationpolicywantstoseethattherewasawaterleakthatfirstoccurredduringthepolicyperiodanditwasapparenttoanyonewhowalkedinandgothis/herfeetweteveniftheclaimwasn’tfileduntilyearsinthefuture.•MarijuanaBusinessTerms:

• Dispensary-isforprofitandhasproductonhand,ownedbythedispensary.• Collective-acollectivegardenisanon-profit"donation"basedbusinessthathousesacollection

ofmarijuanafromindividualsandthenisofferedtomedicalmarijuanapatientsfora"suggesteddonation".

•MGAorGAorBGA(ManagingorGeneralorBrokeringGeneralAgent):Awholesaleinsuranceintermediarywiththeauthoritytoacceptplacementsfrom(andoftentoappoint)retailagentsonbehalfofaninsurer.Managinggeneralagentsgenerallyprovideunderwritingandadministrativeservices,suchaspolicyissuance,onbehalfoftheinsurerstheyrepresent.•MarketPrice(orMarketValue):Thepriceatwhichaitemcanbeboughtorsoldatanyparticulartime.•MaterialDamage:Insuranceagainstdamagetoavehicleitself.Itincludesautomobilecomprehensive,collision,fireandtheft.Materialdamageandphysicaldamagearetermsthatoftenareusedinter-changeably.•MaximumMedicalImprovement(MMI)MaximumMedicalImprovement(MMI)isatreatmentplateauineachperson’shealingprocess.Itcanmeanthatthepatienthasfullyrecoveredfromtheinjuryorthatthepatient’smedicalconditionhasstabilizedtothepointthatnomajormedicaloremotionalchangecanbeexpectedintheinjuredworkers’condition.Thisoccursdespitecontinuingmedicaltreatmentorrehabilitativeprogramstheinjuredworkerpartakesin.•MedPay:Believeitornot,mostofthecostassociatedwithourinsurancerates(howcarinsuranceratesaredetermined)isbasedonthecosttosettleaclaimversustheamountofmoneyactuallypaidforinjuryliabilityorphysicaldamage.Thinkattorneyfeesandcourtcosts.“Medpayinsurance,”or“medicalpaymentstoothers,”isanoptionalcoverageadditiontoyourautoinsurancepolicythateasesthenecessityofcourtinvolvementafteranaccident.Basically,MedPaywillcoverthemedicalcostsassociatedwithbodilyinjuryresultingfromanaccident,withouthavingtoproveanyfault.However,youmustbebothinjuredandhaveexpensesassociatedwithtreatmentresultingfromtheaccident.Wearetalkingbasicinjuryhere.Limitsdonottypicallyexceed$5,000.Also,thiscoveragecannotbetriggeredinthefutureafteranaccidenthasoccurred,e.g.nostiffnecktwoweeksdowntheroad.Accordingtomostpolicylanguage,anyinsuredinyourvehicleiseligibleforMedPayrewards.“Insured”oftenreferstothenamedinsured,orthenameonthepolicy,thenamedinsured’sspouseandfamilymembers,anyonelivingintheinsured’shousehold,oranyoneyouallowtodriveyourvehicle.However,therearealsosomeexclusionstothistypeofpolicy.



MedPayispurchasedona“byvehicle”basis.Thismeansifyouhaveonepolicycoveringtwocars,youmustpurchaseMedPayforbothifyouwishtobecoveredwhileineithervehicle.Thisissimilartophysicaldamagecoverage,whereyoumayhavetwocarsonapolicy,butonlywishtohaveonerepairedintheeventofanaccident.Medpayandpersonalinjuryprotection(PIP)areno-faultcoverage,conceivedinanattempttoreducetheoverallcostofcarinsuranceandunclogtheAmericancourtsystem.Whetherit’sworkingornotisanongoingdebate.Nofaultcoveragereferstoinstanceswhereanindividual,otherthanthedriverofthevehicle,isinjuredinaminoraccidentwherefaultmaybedifficultorimpossibletodetermine.Thiscoveragewillpayaspecifiedamountofmoneytotheinjuredparty.ThetypicalcoveragelimitsformedpayandPIPspanfrom$1,000to$10,000.Let’slookatanexample:You’redrivingafriendtowork,whenyoucareenofftheroadandhitatreeatlowspeedwhileavoidingacarthatwanderedintoyourlane.Yourfriendbreaksherarmduringtheimpact.Shemaychoosenottofileaclaimagainstyourinsurancecompany,butstillneedstogotothehospitalandgettreatment,resultingina$2,500hospitalbill.Ifyouhavemedpaycoverage,yourinsurancepolicywillcoverthehospitalcostswithouttheneedforyourfriendtofileaclaimtodeterminewhowasatfaultorchargedthedeductible.The$2,500hospitalvisitwouldbemuchcheaperthaninvestigatingtheaccidentandpayingcourtcostsandattorneyfees.Medpaycoveragelimitsare“stackable”insomestates.Thismeansifyouhavea$5,000medpaylimitonyourpolicyandhaveanaccidentinwhichthreepeopleareinjured,yourinsurancecompanywouldberesponsibleforupto$15,000ininjuryexpense.Somearguethatifyouhavehealthinsurancethereisnoneedtohavemedpayinsurance,ashealthinsurancemaycoveryourinjuryexpenseintheexampleabove.Asalways,Irecommendpurchasingasmuchinsurancecoverageasyoucanafford.Getanonlinequoteandspeaktoyourinsurancecompanyorindependentagentifyouhavequestionsaboutmedpaycoverageorcost.Thiswillensureyouarefullcoveredatafairprice.•MedicalPaymentsInsurance:Acoverage,availableinvariousliabilityinsurancepolicies,inwhichtheirinsureragreestoreimbursetheinsuredandothers,withoutregardfortheinsured'sliability,formedicalorfuneralexpensesincurredastheresultofbodilyinjuryordeathbyaccidentunderspecifiedconditions.•Misrepresentation:Afalse,incorrect,improper,orincompletestatementofamaterialfact,madeintheapplicationorclaimprocess.•MonopolisticState:InregardstoWorker’sCompensationInsurance,WashingtonStateisamonopolisticstate.TheymaketheirownrulesandoperatetheonlysourceforWorker’sCompensationInsurance,theWashingtonStateFund.Labor&IndustriesWashingStateFundisanexclusivestatefund.InsuranceinWashingtonmustbepurchasedthroughthisfundunlesstheentityisaqualifiedself-insurer.•MonthlyLimitofIndemnity:Themonthlylimitofindemnitymethodimposesamonthlymaximumbasedonthefractionallimit(1/3,¼,or1/6ofthepolicylimits).Thisformdoesnotlimitthelengthofrecoveryasisoftenthought;itlimitstheamountofbusinessincomelossthatmayberecoveredonamonthlybasis.



•MortgageeClause:ishowthelenderwillrequiretheirname,addressandloannumbertoappearontheinsurancedocuments.•MotorTruckCargoInsurance:ProvidesinsuranceonthefreightorcommodityhauledbyaFor-hiretrucker.Itcoversyourliabilityforcargothatislostordamagedduetocausessuchasfire,collision,orstrikingofaload.(Progressive)•MotorTruckGeneralLiabilityInsurance:Ifyou’reafor-hiretrucker,ormotorcarrier,you’llmostlikelyneedTrucker’sGL.ExamplesofsituationswhereMotorTruckGeneralLiabilityinsurancemayprovidecoverage(Progressive):

• Customersslipping/fallingonyourpremises• Erroneousdeliveryofproductsresultingindamage• Actionsofadriverwhilerepresentingtheinsuredandonthepremisesofothers,suchas,loading

docks,truckstops,etc.• Libelandslanderexposures• Fireonrentalpropertyduetoinsured’serror

•MutualInsuranceCompany:Aninsurancecompanyinwhichtheownershipandcontrolisvestedinthepolicyholdersandaportionofsurplusearningsmayreturntopolicyholdersintheformofdividends.Nocapitalstockexists.•MysteriousDisappearance:Personalpropertythathassimplydisappearedwithoutanyindicationofatheft.-N-•NAICS(TheNorthAmericanIndustryClassificationSystem):NAICS(pronounced"nakes")isusedbybusinessandgovernmenttoclassifybusinessestablishmentsaccordingtotypeofeconomicactivity(processofproduction)inCanada,MexicoandtheUnitedStates.IthaslargelyreplacedtheolderStandardIndustrialClassification(SIC)system;however,certaingovernmentdepartmentsandagencies,suchastheU.S.SecuritiesandExchangeCommission(SEC),stillusetheSICcodes.NAICnumbersareassignedonanationalbasisbytheNationalAssociationofInsuranceCommissioners.Theyareusedastheprimarycompanyidentificationinmoststatesforeverythingfromannualreportstothefilingoftaxes.*Additionally,thevariousagencieswithinastatemayalsoassignstatecodestobeusedonastatebasiswhendealingwiththatagency.Forexample,theInsuranceDepartmentwilloftenassignaCertificateofInsurancenumberwhenacompanyislicensed.AstatemayrequirecompaniestousethatnumberinsteadoftheNAICnumber.TheDepartmentofMotorVehicles(DMV)mayalsoassignaspecificnumberforuseonlywithDMVrelatedbusiness.**FromSafecowebsite•NamedPerils:Coverageinapropertypolicythatprovidesprotectionagainstlossfromonlytheperilsspecificallylistedinthepolicyratherthanprotectionfromphysicalloss.Examplesofnamedperilsarefire,windstorm,theft,smoke,etc.•NationalAssociationofInsuranceCommissioners(NAIC):Theassociationofinsurancecommissionersofvariousstatesformedtopromotenationaluniformityintheregulationofinsurance.•Negligence:Failuretousethecarethatareasonableandprudentpersonwouldhaveusedunderthesameorsimilarcircumstances.•NOC:NotOtherwiseClassified.Atermusedintheclassificationsectionofliabilityorworkers'compratingmanuals.IfalistingisfollowedbyanNOC,itmeanstousethisclassificationifaninsuredcannotbeclassifiedmorespecifically.



•No-Fault:Atypeofautoinsurancemechanismwherebytherighttosueanotherpartyfordamagescausedbynegligenceislimitedand,inexchange,expandedfirstpartybenefitsareoffered.•No-faultAutomobileInsurance:Aformofinsurancebywhichaperson'sfinanciallossesresultingfromanautomobileaccidentarepaidbyhisorherowninsurerregardlessofwhowasatfault.The12statesthatcurrentlyhaveorincludeano-faultcarinsurancescenarioare**:(source:ecoverage.com)

1. Florida2. Michigan*3. NewJersey4. NewYork5. Pennsylvania6. Hawaii7. Kansas8. Kentucky9. Massachusetts10. Minnesota11. NorthDakota12. Utah

Nineofthesestatesareconsideredjust“No-Fault”andthreeareconsidered“Choice”states.Inaso-called"Choice"state,driverscanchooseano-faultsystempolicyorapolicybasedontraditionaltortliabilitylaw.Thetortpolicyusedin"Choice"statesarethesameasthoseusedinstateswithoutno-faultlawsand,therefore,theclaimsproceduresarethesame.Adriverretainsherrighttosue,generallywithoutanysignificantstatutorylimitations.Thethree"Choice"statesareKentucky,NewJerseyandPennsylvania.Kentucky'sno-faultschemeusesamonetarythreshold.NewJerseyandPennsylvania,theno-faultinsurancesystemusesaverbalthreshold.No-faultcarinsuranceistheexceptionratherthantherulewhenitcomestomotorvehicleaccidentinsurancecoverage.Thepurposeofthisinsuranceschemeissimple,theactualimplementationisnot.Ifyouliveinastatethathassomeformofno-faultinsurance,seekingprofessionalguidanceinmakingyourcarinsurancepurchasedecisionswillsteeryouintherightdirection.*MichiganisthesoleexceptionasitrequiresaPropertyProtectionInsurancepolicywhichpaysfordamagetoyourvehicleregardlessoffault.**TheDistrictofColumbiaandPuertoRicoalsohavesomeformofno-faultinsurance.•Non-disablingInjury:Aninjurywhichmayrequiremedicalcare,butdoesnotresultinlossofworkingtimeorincome.•Non-Contributory:(Askforlegaladvice)Primaryandnoncontributoryisusuallyanattempttoestablishtheorderorpriorityofcoverage;itisnotconcernedwithallocatingpercentagesoffault.Noncontributorygenerallymeansthataninsurerhasagreednottoseekitsindependentrighttocontributionwhentwoormoreinsurersapplytothesameaccidentforthesameinsured.Inthiscontext,noncontributoryappearstobeshorthandfortheinsurergivingupitsrightofcontribution.

Waiverofsubrogationandsimilarapproachestopreventcontributionmayfailastherightofcontributionisindependentofanyinsured'srights.Assubrogationisderivedsolelyfromaninsured'srights,theinsurerwouldlikelyretainitsrightofcontribution.



PrimaryandnoncontributoryislikelyredundantwhentwoISOCGLpolicieswithISOadditionalinsuredendorsementsbothapplytothesameaccidentandsameinsuredasthepost-1997ISOCGLpolicyalreadysetsthepriorityofcoverageintheotherinsurancecondition;ifyouareanadditionalinsuredbyendorsementonmypolicy,mypolicyisprimaryandyourpolicyisexcess.

However,non-ISOorproprietaryadditionalinsuredendorsementsmaychangethepriorityofcoverageinamannernotintendedbythepartiesunlesstheunderlyingcontractrequiresprimaryandnoncontributory.Whilethismaybeviewedasunwelcome,itisrealityofthemarketplace.

Finally,imposingprimaryandnoncontributoryonexcessorumbrellapoliciesisinherentlyproblematic;theotherinsuranceconditionofmostumbrellapoliciesmaywellthwartanysuchattempt.Further,thecaselawonthismatterof"verticalversushorizontal"exhaustionismixedandunresolvedinmoststates.•Non-OwnedAuto:Thedriver’spolicywillaffordvaluablebackupcoverageintheeventneithertheemployer’snortherentalagency’spolicyisavailabletocoveraclaim.Manypersonalpoliciescovernon-ownedautos,atermthatincludesvehiclesrentedbythepolicyholderoraresidentfamilymember.(Personalpoliciesdonotusetheterm“hiredauto”.)

•NPI:NoPriorInsurance

-O-•OCIP(Owner-ControlledInsuranceProgram):AnOwner-ControlledInsuranceProgram(OCIP)isawrap-upunderwhichaprojectownerprovidesvariousinsurancecoveragestocontractorsandsubcontractors.OCIPscompriseabout90%ofthewrap-upprogramscurrentlybeingperformedintheU.S.Anothertypeofwrap-upisaContractor-ControlledInsuranceProgram(CCIP),underwhichthegeneralcontractoristhesponsor.•Obligee(Bond):Thepartywhoistherecipientoftheobligation.Abusinessorpersonwhoasksfororrequiresthebond.Alsocalledpromisee.•OccupationalHazards:Occupationswhichexposetheinsuredtogreaterthannormalphysicaldangerbytheverynatureoftheworkinwhichtheinsuredisengaged,andthevaryingperiodsofabsencefromtheoccupation,duetothedisability,thatcanbeexpected.•Occurrence:Anaccident,includingcontinuousorrepeatedexposuretosubstantiallythesamegeneral,harmfulconditions,thatresultsinbodilyinjuryorpropertydamageduringtheperiodofaninsurancepolicy.•OccurrenceClaimsCoveragePolicy:Aliabilityinsurancepolicythatcoversclaimsarisingoutofoccurrencesthattakeplaceduringthepolicyperiod,regardlessofwhentheclaimisfiled.Occurrencecoverageis,inmyopinion(andothersdiffer),thebetteroptionforthebusinessowner.Occurrencecoverageisinsurancethatprovidescoveragefortheactwhenitoccurs-regardlessofwhenitisreported.Ifyouhadcoverageunderanoccurrencepolicyin2000andtheclaimisreportedtoday(theyjustfoundthedefectinthewall,liketheexampleabove,forexample)thentheclaimiscovered.Anoccurrencepolicyobligatestheinsurancecompanytopayforclaimsarisingoutofoccurrencesduringthepolicyperiodregardlessofwhentheclaimisreported.Thepolicyholderiscoveredforanyincidentthatoccursduringthetermofthepolicyregardlessofwhentheclaimarisingfromtheincidentisreportedtothecompany.Insomesituationstheclaimmightbemademanyyearsaftertheincidentoccurred.Thisleadstouncertaintyforboththeinsuredandtheinsurer.•OceanMarineInsurance:Anoceanmarineinsurancepolicyprovidesprotectionagainstawiderangeofcauses-of-lossonanamed-perilbasis,includingperilsofthesea,suchascollision,highwaves,stranding;andotherperils,suchasdamageorlosscausedbypirates,jettison,fire,barratry,etc.However,attherequestofthenamedinsured,oceanmarineinsurancecanprovideprotectionagainstallrisks,excepttheonesthatarespecificallyexcludedinthepolicy.



Herearethecommoncoveragesprovidedbyoceanmarineinsurance:

• Hullinsuranceresemblesthecollisioncoverageofautoinsurancepoliciesinthatitprovidesprotectionagainstanypotentialdamagetothevesselorship.Ifyouoptforthistypeofoceanmarineinsurancecontract,youwillhavetopayacertaindeductibleintheeventofacoveredloss.Hullinsurancehasanextraprovisioncalledcollisionliabilitycoverageunderwhichshipownerswhosevesselscausephysicaldamagetoanothervesseland/oritscargo,areprotected.However,thisclausedoesnotpertaintoliabilityforbodilyinjury.

• Freightinsuranceprovidesfinancialprotectiontotheownerofthevesselintheeventthatthecargoisdamagedorlost.

• Cargoinsuranceindemnifiestheshipperofthegoodsifthelatterhavesufferedanydamageorloss.Dependingonthepersonalinsuranceneedsofshippers,cargoinsurancecancoverasingleshipmentoritcanbewrittenonanopen-policybasiswhereuponthepolicyprovidesautomaticcoverageforeveryshipment.

• Protectionandindemnityinsuranceprotectstheownerofthevesselagainstlegalliabilitythatmayariseoutofthebodilyinjuryorpropertydamagetoothers.(c/oinsuranceqna.com)

•OrdinanceOrLawInsurance:Coveragedesignedtoprovideprotectionagainstfinanciallossfor(1)thelossofvalueofanundamagedportionoftheexistingbuildingwhichmustbedemolishedand/orremovedtoconformwithmunicipalordinance,code,etc.;(2)thecostofdemolitionoftheundamagedportionsofthebuildingnecessitatedbytheenforcementofbuilding,zoningorlanduseordinanceorlaw;(3)anyincreasedexpensesincurredtoreplacethebuildingwithoneconformingtobuildinglawsorordinances,ortorepairthedamagedbuildingsothatitmeetsthespecificationsofcurrentbuildinglawsorordinances.•OverheadInsurance:Atypeofshort-termdisabilityincomecontractthatreimbursestheinsuredpersonforspecified,fixedmonthlyexpenses,normalandcustomaryintheoperationandconductofhis/herbusinessoroffice.•OCP(Owners&ContractorsProtectiveLiabilityCoverage):Astand-alonepolicythatcoversthenamedinsured'sliabilityforbodilyinjury(BI)andpropertydamage(PD)caused,inwholeorinpart,byanindependentcontractor'sworkfortheinsured.Thecontractorpurchasesthepolicytoprovidecoverageforvicariousliabilitytheclient(projectowner)incursasaresultofthecontractor'sactsoromissionsontheproject.TheOCPpolicyalsorespondstoliabilityarisingoutoftheinsured'sownactsoromissionsinconnectionwithitsgeneralsupervisionofthecontractor'soperations.•Outservant:Adomesticservantwhoseprincipaldutiesareoutside,suchasagardenerorchauffeur.•OwnersInterestLiabilityCoverage:CoveragethatextendsanOwner’sliabilityonapropertybeingbuiltbyaGeneralContractorforsaidOwner.Whileitistruethatmuchoftheriskiswiththecontractors,itisamistaketoconcludetheownerhasnopotentialforliability.Whileobtainingthestatusofadditionalinsuredonthecontractor’sCGLpolicyorrequiringthecontractortoprovideanOCP(Owners&ContractorsProtectiveLiabilityCoverage)policyhelpsprotecttheowner,suchcoverageisquitelimitedandshouldnotbetheonlyliabilitycoverageavailabletotheowner.Ownersofconstructionprojectsshouldhavetheirownliabilitycoverage.Arealisticevaluationoftheriskthatconfrontsprojectownersduringandafterconstructionindicatesmostownersareexposedtoconsiderableliability.Theownershipofproperty(includingtheownershipofbuildingsundergoingrenovation)andconstructionworkcompletedbycontractorsaretwoobviousexamples.OneuniquefeaturethatisoftenavailableontheOwner’sInterestpolicyistheextendedcompletedoperationscoverage–anendorsementthatextendsproducts-completedoperationscoveragetoprotecttheownerforproducts-completedoperationsclaimsthattakeplaceaftertheprojectiscompletedandafterthepolicyexpires.Theextendedcompletedoperationscoveragelengthenstheperiodofcoverage



forcompletedoperationsforseveralyearsafterprojectcompletion,oftenmatchingthestate’sstatuteofreposetimeframeforsuitsagainsttheownerforcompletedwork.Manypropertyownershavelearnedcostlylessonsabouttheliabilityassociatedwithnewconstruction—andthathistoricalmeansofaddressingthisliabilityoftenfallsshort.Evenwhenapropertyownerisnamedasanadditionalinsuredonageneralcontractor’sliabilitypolicyitremainsvulnerabletocertainconstruction-relatedclaims—mostnotably,toconstructiondefectclaimswhichcanemergeyearsafteraproject’scompletion.Owner’sInterestLiabilityInsuranceclosesthispotentiallycatastrophiccoveragegapbyprovidingprojectownerswithdedicatedgeneralliabilitylimits,plusoptionalcompletedoperationscoveragewhichisfrequentlyexcludedonstandardgeneralliabilitypoliciesandnotprovidedonOwnerContractor'sProtectiveLiabilitypolicies.Owner’sInterestLiabilityInsuranceprovidesgeneralliabilityinsurance(excessofthegeneralcontractor’spolicy)forvicariousliabilitythelandownercanfaceduringconstruction.Protectionwilldropdowntopaycoveredlossesthatareuncollectibleunderthegeneralcontactor’spolicybecauselimitshavebeenerodedorcoverageotherwisecannotrespond.Thepolicycanbeextendedtoprovidecompletedoperationscoveragealignedwiththestatuteofreposeintheapplicablejurisdiction.AndbecausecoverageisunderwrittenbyLexington,itcomeswiththehighlyratedfinancialstrengthlendersrequire.-P-•PartialDisability:Theresultofanillnessorinjurywhichpreventsaninsuredfromperformingoneormoreofthefunctionsofhis/herregularjob.Abenefitsometimesfoundindisabilityincomepoliciesprovidingforthepaymentofreducedmonthlyincomeintheeventtheinsuredcannotworkfulltimeand/orispreventedfromperformingoneormoreimportantdailydutiespertainingtohisoccupation.•PatientProtectionandAffordableCareAct(PPACA):CommonlycalledObamacareortheAffordableCareAct(ACA),PPACAisaUnitedStatesfederalstatutesignedintolawbyPresidentBarackObamaonMarch23,2010.TogetherwiththeHealthCareandEducationReconciliationAct,itrepresentsthemostsignificantregulatoryoverhaulofthecountry'shealthcaresystemsincethepassageofMedicareandMedicaidin1965.TheACAaimstoincreasethequalityandaffordabilityofhealthinsurance,lowertheuninsuredratebyexpandingpublicandprivateinsurancecoverage,andreducethecostsofhealthcareforindividualsandthegovernment.•PayrollorGrossSalesBasisRating:Manycommercialinsurancepolicypremiumsareratedonavariablebasissuchaspayroll,grosssales,orcontractcost,andaresubjecttoannualadjustmentfollowingthepolicyexpirationthrougha“PremiumAudit”.Thisisthemostequitablemethodofobtainingafairpremiumforexposuretorisk.BasisRatingforGeneralLiabilityInsurance.PremiumforaGeneralContractor,forexample,canbebasedononeorbothoftwothings,eitheryourgrossreceiptsandoryourpayrollandcostofsubcontractors,dependingonwhichmarketisquotingforyou.Asfarasthedistinctionforsubcontractor’scosts,i.e.materialsvs.labor,mostareratedoffoftheirsubcontractor’slaborpayroll.Ifyoursubcontractorsdonothavetheirownliabilityinsurancethiswillbepickedupatyouryearendauditandyouwillpayasignificantlyhigherpremiumforthemthanyouwouldhavehadtheycarriedtheirowninsurance.Forexample,supposeyouareaGeneralContractorwithemployedcarpenters.Yourrateper$1,000ofpayrollmaybe$39.45*,butyourratefortheTotalCostofsub-contractorsmayonlybe$0.58*per$1,000.(*Thesenumberswerepickedoutofthe‘air’forillustrationpurposesonly.)Thepayrollinformationisalsousedtoreconcilepayrolltotalsbetweenownersandemployeesandtheamounts



requestedforpayrollverificationontheformssuchas941sorstateunemployment.Theremaybedifferences,butassumethatindustrywideemployeesarebasedonPayrollandsub-contractedworkisbasedonTotalCost.Makesurethatyou'vedoneaproperjobofdocumentingthatthesubsaretrulysub-contractors,e.g.certificatesofinsuranceforbothGeneralLiabilityandWorkers'Compensation.BecauselackingdocumentationwillresultintheTotalCostofsub-contractedworktobepickedupandchargedforasemployees.Thusanunexpectedlargeauditbillingforthepriorterminsurancepolicy.Differentratingmethodsareusedtomoreaccuratelyreflecttheexposure.Forexample,arestaurantsexposureismoreaccuratelydefinedbyusingreceipts,ratherthanarea,becauseitbetterdeterminesthevolumeofcustomers(exposure)thatcomesintotherestaurant.However,anapartmentbuildingisratedbyunitsornumberofapartments,andanofficebuildingisratedontheareaorsquarefootageofthespace.Contractorsusepayrollbecausethismoreaccuratelyreflectstheirparticularexposure.Themostcommonratingbasisispayroll,followedbygrosssales,butmaybeadmissions,area,totalcost,etc.Someratingbasesareuniquetotheclass,suchashospitals,whichareratedonthetotalnumberofbeds.Payrollincludesallremunerationsuchascommissions,bonuses,andpiecework.UnlikeWorkersCompensation,thefollowingmaybeexcludedfromratablepayroll-tips,groupinsurancepremiums,severancepay,clericalofficeemployees,outsidesalespersons,drivers,anddrafters.Youmayexcludetheovertimeamountifyourbooksaresetuptodistinctlyshowovertimeapartfromregularwages.Mostinsurerswilllimitratablepayrollforofficersto$27,400.GrossReceiptsorSalesincludestheentireamountchargedforallgoodssoldordistributed,servicesprovided,rentals,dues,orfees.Thereareafewareaswhichmaybeexcludedfromgrosssales:salesorexcisetaxeswhicharecollectedandsubmittedtoagovernmentaldivision,installmentfinancecharges,freightchargesifbilledseparately,androyaltyincomefrompatentrightsorcopyrightincome.Ratesarenormallyappliedper$1,000.WhyAmIBeing"Charged"SoMuchPayrollForMyGeneralLiabilityPolicy?IDon'tMakeThatMuch.Businessesareratedonaset,minimumpayrollfigure,nomatterwhatyouactuallymake.ThisfigureisestablishedbytheNationalCouncilofCompensationInsuranceandcannotbereduced.WhyAreSomeGeneralLiabilityPoliciesRatedOnArea,AndOthersOnPayrollOrReceipts?Differentratingmethodsareusedtomoreaccuratelyreflecttheexposure.Forexample,arestaurantsexposureismoreaccuratelydefinedbyusingreceipts,ratherthanarea,becauseitbetterdeterminesthevolumeofcustomers(exposure)thatcomesintotherestaurant.However,anapartmentbuildingisratedbyunitsornumberofapartments,andanofficebuildingisratedontheareaorsquarefootageofthespace.Contractorsusepayrollbecausethismoreaccuratelyreflectstheirparticularexposure.Giveaccuratepayrollandsubcontractorcosttoyourinsuranceagent.Thecostofyourcontractor’sgeneralliabilityinsuranceisbasedonyourpayroll.Donotunderreportthisfigure.Underreportingyourpayrollcanresultinanauditpremiumattheendoftheyear…Basicallyyouwillhavetopaythedifference.•Peril:Thecauseofapossibleloss,suchasfire,windstorm,theft,explosion,orriot.•PerOccurrence:Liabilityinsurancepereachpotentiallawsuit.(Forexample;500kPeroccurrence/1Maggregate)•Persistency:Atermusedtorefertothelengthoftimeinsuranceremainscontinuouslyinforce.



•PersonalInjury&AdvertisingInsurance:Yourbusiness'commercialliabilitypolicyhascoverageyoumaynothaverealizedwasinthepolicy.Thiscoverageiscalled"personalandadvertisinginjurycoverage"andmaybesetapartasseparatecoverageor"Coverage-B."Thecoveragecanprovidecoverageforavarietyofactsaboveandbeyondtypicalphysicaldamageclaims.Thepurposeofthisinformationbelowistoprovideabriefoverviewofthecoverage.

WhatisanAdvertisingInjury?Anadvertisinginjuryisaninjurytoathird-partybroughtaboutbythebusiness'advertisingitsgoodsandservices.Thiscanoccurbycopyrightortrademarkinfringement.Itcanalsooccurasaclaimoflibel,slander,orinvasionofprivacy.Typically,acompetitorofyourbusinesscomplainsthatanact,advertisement,practice,orcommentyouoryourstaffhasmadehasdamagedtheirbusiness.Forexample,incomparingproducts,youradvertisementusesaphotoofyourcompetitor'sproductandmakesafalseclaimaboutthecompetitor'sproduct.Thecompetitorsuesyourbusinessforavarietyofclaims:defamation,trademarkinfringement,etc.Yourcommercialpolicywouldprovideadefenseandindemnityforthiskindofclaim.

WhatClaimsareCovered?Yourbusinessisprovidedadvertisinginjurycoveragethroughyourcommercialgeneralliabilitypolicyforclaimssuchas:

• Libel• Slander• InvasionofPrivacy• CopyrightInfringement• TrademarkorTradeDressClaims• CertainStateLawClaims• CertainMisappropriationClaims• UnfairCompetitionClaims(olderpolicies)

Thetypicalcommercialgeneralliabilitydefinesadvertisingas:

Anoticethatisbroadcastorpublishedtothegeneralpublicorspecificmarketsegmentaboutyourgoods,productsorservicesforthepurposeofattractingcustomersorsupporters.

Thecoverageprovidesyourbusinessadefenseandindemnificationfordamagesaslongastheclaimrelatestoabusinessadvertisingreasonandisnotanintentionalnon-advertisingclaim.However,thedefinitionof"advertising"hasbeeninterpreteddifferentlyfromstatetostate.Somecourtsrequiretheactivitytobewiderangingcommunicationtoabroadaudiencewhileothercourtsdefinethesimpleactofbusinesspromotiontobeadvertisingwithoutregardtothesizeoftheaudience.

ThereareexclusionsfromcoverageinmoststandardCGLpolicies.Mostoftheexclusionslooktowhethertheactcausingtheclaimwasanintentionalactorknowingviolationofthelaw.Typicalexclusionsfromcoverageinclude:

• KnowinglyPublishingFalseInformation-Coverageismeanttocoverthoseinstanceswhereadvertisingorpromotionunintentionallyincludesfalseormisleadinginformation.



• KnowinglyViolatingtheRightsofAnother-Asanexample:Ifyourbusinessknowsithasno

permissiontouseachild'simageinitsadvertising,anddoessoanyways,coveragewillbeexcluded.

• CriminalActs-Criminalcopyrightandtrademarkinfringement,orothercriminalactsarenotcovered.

• BreachofContractandContractualLiability-Yourbusinesscannotassumeadvertisingliabilitybycontract.Forexample,ifyourbusinessrentsahallaspartofatradeorganization,andyourbusinesssignsaholdharmlessagreementwiththeorganizationandhall,ifavisitorsuesthetradeorganizationorhallandyourbusinessbecomesliableasaresultoftheholdharmlessagreement-thereisnocoverage.

• Price,Quality,andPerformanceClaims-Generallydamagesincurredbecauseoferroneousprice,quality,orperformanceclaimsarenotcovered.Ifowingtoaprintererroryouadvertisea$10,000usedcarfor$1,000,andactuallysellthecarattheadvertisedpriceof$1,000,theinsurerwillnotreimbursetheother$9,000.

Thereareotherexclusionsthatarelesslikelyandyouwillwanttoreviewtheexclusionswithyourinsuranceprofessional.

WhatAboutWebsites,BulletinBoards,andForums?First,understandthatcertainbusinessesareexcludedfrommostadvertisinginjurycoverage:

• InternetServiceProviders• WebSiteDesignersandPublishers• AdvertisingCompanies

Thesecompanieswillneedtopurchaseaseparateendorsementtobecoveredcompletely.However,creatingyourowncompanywebsitedoesnotturnyourbusinessintoanadvertisingcompany.Generally,ifyourbusinessdesignsandbuildsawebsitecoverageextendstothepromotionaladvertisingmaterialonthesite.However,thiscoverageisbeinglimitedeachyearasinsurersbegintorecognizetheriskofadvertisingclaimsrelatedtointernetactivities.Today,mostStandardCGLpoliciesexcludecoverageforelectronicforumsorbulletinboardshostedbytheinsured.CGLpoliciesalsonowexcludefromcoverageclaimsrelatedto"spam"ormasselectronicadvertising.Again,thisisanareawhereyouwillwanttospeakwithyourinsuranceprofessional.•PersonalArticlesFloater:Aformofcoveragedesignedtomeettheneedsforinsuranceonpropertyofamoveablenature.Thecoverageusuallyprotectsagainstallphysicalloss,subjecttospecialexclusionsandconditions.Examplesofpropertycoveredincludejewelry,furs,silverware,andfinearts.•PII(PersonallyIdentifiableInformation):Confidentialandprivateclientdata. •PIP(PersonalInjuryProtection):AnextensionofcarinsuranceavailableinsomeU.S.statesthatcoversmedicalexpensesand,insomecases,lostwagesandotherdamages.PIPissometimesreferredtoas"no-fault"coverage,becausethestatutesenactingitaregenerallyknownasno-faultlaws,andPIPisdesignedtobepaidwithoutregardto"fault,"ormoreproperly,legalliability.PIPisalsocalled"no-fault"because,bydefinition,aclaimant's,orinsured's,insurancepremiumshouldnotincreaseduetoaPIPclaim.StateswithmandatoryPIPcoverage(*OrangeInsuranceislicensedinthesestates):

• Delaware• Florida*• Hawaii• Kansas• Kentucky



• Massachusetts• Michigan• Minnesota• NewJersey• NewYork• NorthDakota• Oregon*• Pennsylvania• Texas(unlessawaiverissignedatinitialpurchaseofthepolicyalsoknownastheexclusion

agreement)• Utah• Washington*(unlessawaiverissignedatinitalpurchaseofthepolicy)

o WA.SpecificDetails:§ http://www.insurance.wa.gov/your-insurance/auto-insurance/personal-injury-protection/§ http://www.insurance.wa.gov/your-insurance/auto-insurance/personal-injury-protection/how-

much-pip-covers/•PersonalLines:Thosetypesofinsurance,suchasautoorhomeinsurance,forindividualsorfamiliesratherthanforbusinessesororganizations.•Personalrepresentative:Apersonappointedthroughthewillofadeceasedorbyacourttosettletheestateofonewhodies.•PhysicalDamage:Damagetoorlossoftheautoresultingfromcollision,fire,theftorotherperils.•Policy:Theprintedlegaldocumentstatingthetermsoftheinsurancecontractthatisissuedtothepolicyholderbythecompany.Acontractofinsurance.Thelegaldocumentissuedbythecompanytothepolicyholder,whichoutlinestheconditionsandtermsoftheinsurance;alsocalledthepolicycontractorthecontract.•PolicyTerm:Thatperiodforwhichaninsurancepolicyprovidescoverage.•Policyholder:Thepersonwhoownsalifeinsurancepolicy.Thisisusuallytheinsuredperson,butitmayalsobearelativeoftheinsured,apartnershiporacorporation.Apersonwhopaysapremiumtoaninsurancecompanyinexchangefortheinsuranceprotectionprovidedbyapolicyofinsurance.•Pre-NeedInsurance:Anothertypeoflifeinsurancepolicy,calledpre-needinsurance,isintendedforthepersonwhohasselectedspecificarrangementsatafuneralhomeandwantstheassurancethatthosearrangementswillbepaidforandimplemented.Unlikefinalexpensepolicies,whichyoubuydirectlyfromaninsurancecompany,pre-needpoliciesaresoldbyfuneralhomedirectorswhoarealsolicensedagents.Thefuneralhomeisthebeneficiaryofthepolicyandthefuneraldirectorreceivesacommission,likeanyagent,forsellingyouthepolicy.•Premium:Thesumpaidbyapolicyholdertokeepaninsurancepolicyinforce.•PremiumAudit:Simplydefined,itis“theexaminationofaninsured’soperations,records,andbooksofaccounttodeterminetheactualexposuresandapplicablepremiumsforthecoveragesprovided.”Apremiumaudit,whetherbymailoronsiteisanecessaryfunctionofcasualtyinsurance.Premiumsforcasualtyinsurance,inparticularGeneralLiabilityandWorkers’Compensation,arebasedonsuchvariablesassales,receipts,costsorpayrolls.•PrimaryInsurance:Insurancethatpayscompensationforalossaheadofanyotherinsurancecoverage’sthepolicyholdermayhave.•Principal(Bond):Abusinessorpersonwhoisrequiredtopurchaseandsecureabond.Theprimarypartywhowillbeperformingacontractualobligation.•ProRata(Pro-rata):Anon-penaltymethodofcalculatingthereturnpremiumofacanceledpolicy.Areturnpremiumfactoriscalculatedbytakingthenumberofdaysremaininginthepolicyperioddividedbythenumberoftotaldaysofthepolicy.Thisfactorismultipliedbythewrittenpremiumtoarrivewiththereturnpremium.



•Probate:Thecourtsupervisedprocessofvalidatingorestablishingadistributionforassetsofadeceasedincludingthepaymentofoutstandingobligations.•ProbationaryPeriod:Aperiodfromthepolicydatetoaspecifiedtime,usually15to30days,duringwhichnosicknesscoverageiseffective.Itisdesignedtoeliminateasicknessactuallycontractedbeforethepolicywentintoeffect.•Products/CompletedOps:Productliabilityinsuranceprotectsthebusinessfromclaimsrelatedtothemanufactureorsaleofproducts,food,medicinesorothergoodstothepublic.Itcoversthemanufacturer'sorseller'sliabilityforlossesorinjuriestoabuyer,userorbystandercausedbyadefectormalfunctionoftheproduct,and,insomeinstances,adefectivedesignorafailuretowarn.Whenitispartofacommercialgeneralliabilitypolicy,thecoverageissometimescalledproducts-completedoperationsinsurance.

Tounderstandtheneedforthiscoverageitiscriticaltounderstandthepotentialliability.Therearegenerallythreetypesofproducts"claims"acompanymayface:

• ManufacturingorProductionFlaws-Aclaimthatsomepartoftheproductionprocesscreatedanunreasonablyunsafedefectintheresultingproduct.RecentclaimsagainstChinesemanufacturersregardingthepresenceofdangerouschemicalsintheirproductsareanexampleofthistypeofclaim.

• DesignDefect-Aclaimthatthedesignoftheproductisinherentlyunsafe.ThemostmemorableexampleistheseriesofPintocarcasesagainstFordinthe1970's.

• DefectiveWarningsorInstructions-Theclaimthattheproductwasnotproperlylabeledorhadinsufficientwarningsfortheconsumertounderstandtherisk.TheMcDonald's"coffeecase"isanexample.

Thedamagesawardedintheseclaimsincludemedicalcosts,compensatorydamages,economicdamages,and,insomeinstances,attorneys'fees,costsandpunitivedamages.Productliabilityclaimscananddoputbusinessesoutofbusiness-justaskanyoftheofficersfromanyasbestosmanufacturer.

Alltoooften,resellers,graymarketcommercialsellers,andretailersfailtosecurethiscoverage.Thelogicisthat,sincetheydidnot"manufacture"anything,thecoverageisnotnecessary.However,manufacturersarenottheonlyonessubjecttoproductliabilityexposure,retailersandwholesalersareoftenbroughtintoalawsuitforallegednegligencebytheconsumer.Moststatesfollowthe"streamofcommerce"modelofliability.Thismeansthatifyourcompanyparticipatedinplacingtheproductintothe"streamofcommerce,"itcanbeheldliablefordamagestotheenduser.

Ifyourcompanyprovidesanyproductstotheconsumingpublic,thenyourcompanyneedsproductliabilityorcompleted-operationscoverage.Inmostcases,someformofthiscoveragewillbepresentinthestandardcommercialgeneralliabilityorbusinessowners'policy.Youwillneedtoconfirmthiswithyourinsuranceprofessional.Youwillwanttohaveaclearunderstandingofwhatiscovered(forexample,somepolicieswillcovereconomicdamages,butnotpunitiveorstatutorydamages).

Finally,thepremiumsonsuchpoliciesarebaseduponthetypeofproduct,volumeofsales,andtheroleoftheinsuredintheprocess.Thus,underreportingthevolumeofsalesmayseemlikeagoodwaytolowerpremiumsortheideamaybetoinsureonlyapartofthesales.Don'tunderreportortrytoinsurelessthantheactualamountofsales.Thisisbecausethereareusuallysubstantialunderinsurancepenaltiesappliedwhentheinsuredunderinsures.Ontheotherhand,youwillwanttomakeabsolutelysurethatyourproductsareproperlyidentified.Forexample,ifyousupplystepstools,youdonotwantthemcategorizedasladders.Ladderswillhaveamuchhigherpremiumbecauseoftheriskpotential.



•ProductLiability:legalliabilityincurredbyadesigner,manufacturer,merchant,ordistributorbecauseofinjuryordamageresultingfromtheuseofitsproduct.•ProductLiabilityInsurance:Protectionagainstfinanciallossarisingoutofthelegalliabilityincurredbyamanufacturer,merchant,ordistributorbecauseofinjuryordamageresultingfromtheuseofacoveredproduct.•ProfessionalDesignationsAbbreviations:AAIAccreditedAdvisorinInsuranceAAMAssociateinAutomationManagementACSRAccreditedCustomerServiceRepresentativeAICAssociateinClaimsAIMAssociateinManagementALCMAssociateinLossControlManagementAMIMAssociateinMarineInsuranceManagementAPAAssociateinPremiumAuditingARMAssociateinRiskManagementAUAssociateinUnderwritingChFCCharteredFinancialConsultantCICCertifiedInsuranceConsultantCISRCertifiedInsuranceServiceRepresentativeCLUCertifiedLifeUnderwriterCPCUCharteredProperty&CasualtyUnderwriter•PMPL(ProjectManagementProtectiveLiabilityInsurance):Providedbyendorsementtotheownersandcontractorsprotective(OCP)liabilityinsurancepolicy,thiscoveragesimultaneouslyinsuresthevicariousliabilityofaconstructionprojectowner,primaryarchitectorengineer,andgeneralcontractorasco-namedinsureds.•ProfessionalLiabilityInsurance:ProfessionalLiabilityinsurancediffersfromGeneralLiabilityinthatitpertainstonegligenceassociatedwithyourprofessionalservices.Thedamageistypicallyfinancial,ratherthanphysical.Accordingly,aprofessionalsuchasanaccountantwouldbeexpectedtoperforminacertainmannerandabidebyasetcodeofconduct.Violatingthoseprinciplescouldholdtheaccountantresponsibleforharmordamagesdonetoothers.Amanagementconsultantmayhaveadifferentsetofprofessionalexpectationstoabideby.Bothprofessionalsmuststandbytheirparticularprofessionalstandards,orcouldbesubjecttoliabilitysuitsandresultingdamages.•ProofofLoss:Documentationpresentedtotheinsurancecompanybytheinsuredinsupportofaclaimsothattheinsurercandetermineitsliabilityunderthepolicy.Documentaryevidencerequiredbyaninsurertoproveavalidclaimexists.Itusuallyconsistsofaclaimformcompletedbytheinsuredandtheinsured'sattendingphysician.Formedicalexpenseinsuranceitemizedbillsmustalsobeincluded.•Promisee(Bond):Thepartytowhichapromiseismade.•Promisor(Bond):Apersonwhomakesapromise.•PropertyDamageCoverage:Toprotectaninsuredagainstlegalliabilityfordamagebyaninsuredtothepropertyofanotherwhileundertheinsured’scare,custodyandcontrol.(Ahomeyou’reworkingonifyouareacontractor,forexample)•PropertyInsurance:Insuranceprovidingfinancialprotectionagainstthelossof,ordamageto,realandpersonalpropertycausedbysuchperilsasfire,theft,windstorm,hail,explosion,riot,aircraft,motorvehicles,vandalism,maliciousmischief,riotandcivilcommotion,andsmoke.•ProximateCause:Thedominatingcauseoflossordamage;anunbrokenchainofeventsbetweentheoccurrenceanddamage.•PunitiveDamages:acourtawardedamountthatexceedstheeconomiclossesandgeneraldamagesofadefendantandisintendedsolelytopunishtheplaintiff.•PUP(PersonalUmbrellaPolicy):Anextralayerofveryaffordableliabilityprotectionoverexistinghomeownersandautoinsurancepolicies.



-Q-•QualificationPeriod:Theperiodduringwhichtheinsuredmustbetotallydisabledbeforebecomingeligibleforresidualdisabilitybenefits.-R-•RRPL(RailroadProtectiveLiabilityInsurance):ItiscommonforrailroadstorequireaproductionorcontractortoprovideRailroadProtectiveLiabilityInsurance(RRPL)forthedurationofprojectsonornearrailways.RRPLisdifferentfromatypicalinsurancepolicyinthatitprotectstherailroad,notthecontractor/production,sinceonlytherailroadisthe"NamedInsured".RRPLcoverstherailroadforactsoromissionsarisingoutofthe"work"atthe"joblocation".(Source:productioninsurance.com)•Rate:Thepricingfactoruponwhichtheinsurancebuyer'spremiumisbased.•RatedPolicy:Sometimescalledan"extrarisk"policy,aninsurancepolicyissuedatahigher-than-standardpremiumratetocovertheextrariskwhere,forexample,aninsuredhasimpairedhealthorahazardousoccupation.•RecallInsurance:Thisisinsurancewhenarecallisinplaceandwillhelpcoverthecostsoftherecall,coststocustomers,lossofgrossprofit,customerlostprofits,adversepublicityandincludeshelpwithPRandcrisismanagement.•Regulation:Supervisionofbusinesspracticesbyagovernmentalentity.•Rehabilitation:1)Restorationofatotallydisabledpersontoameaningfuloccupation,2)aprovisioninsomelong-termdisabilitypoliciesthatprovidesforcontinuationofbenefitsorotherfinancialassistancewhileatotallydisabledinsuredisretrainingorattemptingtoresumeproductiveemployment.•Reimbursement:Thepaymentoftheexpensesactuallyincurredasaresultofanaccidentorsickness,butnottoexceedanyamountspecifiedinthepolicy.•Reinstatement:Theresumptionofcoverageunderapolicywhichhaslapsed.•Reinsurance:Assumptionbyoneinsurancecompanyofallorpartofariskundertakenbyanotherinsurancecompany.Theacceptancebyoneormoreinsurers,calledre-insurers,ofaportionoftheriskunderwrittenbyanotherinsurerwhohascontractedfortheentirecoverage.Thepurchaseofinsurancebyaninsurancecompanyfromanotherinsurancecompany(re-insurer)toprovideitprotectionagainstlargelossesoncasesithasalreadyinsured.•Renewal:Continuanceofcoverageunderapolicybeyonditsoriginaltermbytheinsurer'sacceptanceofthepremiumforanewpolicyterm.•RentLossInsurance:Apolicythatcoversarentalpropertyownerfromlossinrentalvalueduetodamage.Coverage:Thereare,ofcourse,severalrentlosspoliciesfromwhichtochoose.Generally,rentlossinsurancecoversexternalhazardssuchasfire,fallingtrees,floodsandothercalamitiesforatleastsixmonthsthattheunitisuninhabitable.Rentlossinsurancecoversyourpropertydamageaswellasanylostrentalincomefromthedamagedunit(s).Manytimesrentlossinsuranceisofferedaspartofacomprehensiveinsurancepolicyforlandlords.•Renter'sPolicy:Apackagetypeofinsurancethatincludescoveragesimilartoahomeowner’spolicytocoverthepersonalpropertyofarenterortenantinabuilding.•RepairorReplacementCollisionCoverage(pertainingtoautos):Repairorreplacementcollisioncoverageprovidesadditionalcoveragewhenyourcarisatotallossastheresultofacollision.ThiscoverageincreasestheamountTravelerswillpayundercollisioncoveragetothecostofasimilarnewcar.Thecostofthenewcarmustbelessthanthecosttorepairyourdamagedcar.•Replacement:Thesubstitutionofhealthinsurancecoveragefromonepolicycontracttoanother.



•ReplacementCost:Thecosttorepairorreplacepropertyatconstructioncostsprevailingattimeofloss;thecosttorepairorrebuildpropertywithoutconsideringdepreciation.(SeeActualCashValue)•Representation:Statementsmadebyanapplicantintheapplication,whichherepresentsasbeingsubstantiallytruetothebestofhisknowledgeandbelief,butwhicharenotwarrantedasexactineverydetail.•Rescission:Terminationofaninsurancecontractbytheinsureronthegroundsofmaterialmisstatementontheapplicationforinsurance.TheactionofrescissionmusttakeplacewithinthecontestableperiodorTimeLimitonCertainDefensesbuttakeseffectasofthedateofissueofthepolicy,thusvoidingthecontractfromitsinception.•ReservationofRights:Anarrangementwherebyaninsurerdefendsacasewithoutcommitmenttoprovidecoverageintheeventthatthefactsdisclosedduringthetrialrevealthattheoccurrenceisnotcovered.•Reserve:1)anamountrepresentingliabilitieskeptbyaninsurertoprovideforfuturecommitmentsunderpoliciesoutstanding.2)Anamountallocatedforaspecialpurpose.Notethatareserveisusuallyaliabilityandnotanextrafund.•RetroactiveDateofInception:Themostimportantdatestokeepinmindareyourpolicy’sterminationdateanditsretroactivedateofinception.Whatisaretroactivedateofinception?Alsocalleda“prioractscoveragedate,”yourretroactivecoveragedate(a.k.a.retrodate)establishesexactlywhenyourcoveragebegins.Inmostcases,thisdatewillbethedateyoufirstboughtyourpolicy.SomecomprehensiveE&Oinsuranceplansalsoofferprioractscoverage,inwhichcasesyourretrodatemaybeadatepriortoyourpolicypurchase.Foraclaimtobecovered,theallegederrororomissionmustbecoveredbythepolicyandmusthavetakenplaceonoraftertheretroactivedateofcoverage,butbeforethepolicy’sexpirationdate;andtheclaimmustbemadewhilethepolicyisstillinforce.Theclaimmustalsobereportedtotheinsurancecarrierwithinthetimeframestipulatedbythepolicy.So,let’ssayyouboughtyourerrors&omissionscoverageJune1,2008,andthat’syourretroactivedateofinception.Anyclaimsrelatedtoerrorsandomissionsyoumayhavemadepriortothatdatearen’tcovered.Yourpolicy’sterminationdatewasMay31,2009,butyourenewedittomaintaincontinuouscoverage.YourrenewaldatewasJune1,2009,soyournewterminationdateisMay31,2010–butyourretroactivedateofinceptionisstillJune1,2008.AnycoveredclaimsrelatedtoworkbetweenJune1,2008,andMay31,2010,wouldbecovered–aslongastheyaremadeandreportedtoyourcarrierwhileyourpolicyisstillinforce.ButwhathappensifyouchoosenottorenewyourE&Opolicy?Let’ssayaclienthiresyoutodoaproject,butstipulatesinthecontractthatyoumustpurchaseE&Oinsuranceforyourbusiness.Whenthecontractjobiscomplete,youlettheinsurancepolicylapsebecauseyouthinkit’snolongerneeded.Monthslater,yourclientslapsyouwithalawsuitallegingthatitwasabletotracethecauseofafinanciallossbacktoamistakeyoumadewhileworkingontheproject.BecauseyourE&Oinsurancepolicyisnolongerinforce,youhavenocoverageforthatlawsuit–eventhoughthepolicywasactivewhentheerrorwasmade.Regardlessofwhatyourretroactivecoveragedateis,ifyouletyourclaims-madepolicylapse,yourcoverageforprioractsisgone.Youcouldlosecoverageforyearsofwork.Coveragestartsalloveragain,withanewretrodate,onthedayyourpolicyisreinstated.•RevocableTrust:Atrustthatcanbeterminatedorrevokedbyitscreator.•Rider:1)Adocumentwhichamendsthepolicyorcertificate.Itmayincreaseordecreasebenefits,waivetheconditionofcoverageorinanyotherwayamendtheoriginalcontract.2)Aspecialpolicyprovisionorgroupofprovisionsthatmaybeaddedtoapolicytoexpandorlimitthebenefitsotherwisepayable.3)Adocumentthatmodifiesthepolicy.Itmayincreaseordecreasebenefits,waiveaconditionorcoverage,orinanyotherwayamendtheoriginalcontract.



•RightofSurvivorship:atthedeathofoneco-ownerofproperty,thatperson'sinterestinthepropertyautomaticallypassestothesurvivingjointtenantortenants.•Risk:Thechanceofloss.Alsousedtorefertotheinsuredortopropertycoveredbyapolicy.(2)Anychanceofloss.(3)Atermusedtorefertoapersonortheperilinsured.•RiskClassification:Theprocessbywhichacompanydecideshowitspremiumratesforlifeinsuranceshoulddifferaccordingtotheriskcharacteristicsofindividualsinsured(e.g.,age,occupation,sex,stateofhealth)andthenappliestheresultingrulestoindividualapplications.(See:Underwriting)•RiskProfile:ARiskProfiledeterminesanypotentialinsuranceclaimstowhichanindividual,companyororganizationmaybeexposed.Theriskprofilewilloutlinethetypeofrisks,numberofrisksandpotentialeffectsoftheserisks.Thisway,abusinessorindividualcanviewtheiroverall‘exposureprofile’andinsurethemselvesaccordingly-enablingthemtomitigatetheirriskswithspecificinsurancepolicies.•RiskRetentionGroup(RRG):Atypeofinsurancecompany.ThewaythatanRRGisdifferentthana"traditional"insurancecompanyisthateachofitspolicyholdersarealsostockholders.InadditionmostinsurancecompaniesareformedunderstatelawsbutRRGSareformedunderfederallaws-TheFederalLiabilityRiskRetentionActof1986.ARRGwillallowmemberswhoengageinsimilarorrelatedbusinessoractivitiestowriteliabilityinsuranceforalloranyportionoftheexposuresofgroupmembers,excludingfirstpartycoverages,suchasproperty,workers’compensationandpersonallines.Authorizationunderthefederalstatuteallowsagrouptobecharteredinonestate,butabletoengageinthebusinessofinsuranceinallstates,subjecttocertainspecificandlimitedrestrictions.TheFederalActpreemptsstatelawinmanysignificantways.•Robbery(TheftPeril):Thetakingofpropertyfromapersonbyforceorthreatofviolence.-S-•Salvage:Recoverymadebyaninsurancecompanybythesaleofpropertywhichhasbeentakenoverfromtheinsuredasapartoflosssettlement.•Self-Insurance:(1)Aprogramforprovidinggroupinsurancewithbenefitsfinancedentirelythroughtheinternalmeansofthepolicyholder,inplaceofpurchasingcoveragefromcommercialcarriers.(2)Aformofriskfinancingthroughwhichafirmassumesallorapartofitsownlosses.•SettlementOptions:Theseveralways,otherthanimmediatepaymentincash,whichapolicyholderorbeneficiarymaychoosetohavepolicybenefitspaid.•SFHA(SpecialFloodHazardArea):SFHAaredefinedastheareathatwillbeinundatedbythefloodeventhavinga1-percentchanceofbeingequaledorexceededinanygivenyear.The1-percentannualchancefloodisalsoreferredtoasthebasefloodor100-yearflood.ThelandareacoveredbythefloodwatersofthebasefloodistheSpecialFloodHazardArea(SFHA)onNFIPmaps.TheSFHAistheareawheretheNFIP'sfloodplainmanagementregulationsmustbeenforcedandtheareawherethemandatorypurchaseoffloodinsuranceapplies.SFHAsarelabeledasZoneA,ZoneAO,ZoneAH,ZonesA1-A30,ZoneAE,ZoneA99,ZoneAR,ZoneAR/AE,ZoneAR/AO,ZoneAR/A1-A30,ZoneAR/A,ZoneV,ZoneVE,andZonesV1-V30.•ShortRate(OldShortRate):Apenaltymethodofcalculatingthereturnpremiumoftenusedwhenthepolicyiscanceledattheinsured’srequest.Itusesatableoffactorsthatresultsinpenaltiesthatcanbelowerorhigherthanshortrate(90%ProRata)dependinguponthedateofcancellation.•ShortRate(90%ProRata):Apenaltymethodthatwherethepenaltyis10%oftheunearnedpremium.•Short-TermDisabilityIncomeInsurance:Theprovisiontopaybenefitstoacovereddisabledpersonaslongashe/sheremainsdisableduptoaspecifiedperiodnotexceedingtwoyears.•SIC(StandardIndustrialClassification):AStatesgovernmentsystemforclassifyingbusinessesandindustriesbyafour-digitcode.•S.I.R./SIR(SelfInsuredRetention):Portionofapropertyorliabilitylossretainedbyapolicyholder.Mostpolicyholdersdonotpurchaseinsurancetocovertheirentireexposure.Rather,theyelecttotakeadeductible,orportionthattheywillcoverthemselves.Forexample,ahomeownermaypurchase



$150,000worthofinsurancewitha$500deductibleforcertainlosses,suchasroofdamagebyhail.The$500deductibleisoneformofselfinsurance.Itmeansthehomeownerwillcoveralllossesforthatamountorless.•SpecialForm:Causesoflossformsestablishanddefinethecausesofloss(orperils)forwhichcoverageisprovided.Thespecialcausesoflossform(CP1030)provideswhatisreferredtoasallriskscoverage:coverageforlossfromanycauseexceptthosethatarespecificallyexcluded.•SpecialRiskInsurance:Coverageforrisksorhazardsofaspecialorunusualnature.•Spouse'sBenefit:Paymentstothesurvivingspouseofadeceasedemployee,usuallyintheformofaseriesofpaymentsuponmeetingcertainrequirementsandusuallyterminatingwiththesurvivor'sremarriageordeath.•StateFund:Afundsetupbyastategovernmenttoprovideaspecificlineorlinesofinsurance.Somestatepermitprivateinsurerstocompetewiththestatefund.•StateInsuranceDepartment:Adepartmentofastategovernmentwhosedutyistoregulatethebusinessofinsuranceandgivethepublicinformationoninsurance.•StatedValue:Asetspecificvalue,usuallybaseduponanappraisal.Whenthere'satotallossclaim,insurershavetheoptiontopaythelesseroftheStatedValueorActualCashValue.•StrictLiability:Liabilityfordamageseventhoughfaultornegligencecannotbeproven.•StopGap(Employer’sLiability):Stopgapcoverageisdesignedtoprovideliabilityinsuranceforanemployerwhocanbesuedbyanemployeeinjuredinthecourseofemployment.Anemployer'sresponsibilityforinjuriestohisorheremployeesisusuallyhandledthroughworkerscompensationcoverage;thiscoverageisdesignedtoprovideinjuredemployeeswithascheduleofbenefitsinexchangefortheirgivinguptherighttosuetheemployer.However,thereareinstanceswhenanemployercanbesuedforinjuriestoemployees,regardlessoftheexistenceofworkerscompensation.

Insuchinstances,theemployershouldhaveemployer’sliabilityinsurance;thiscoverageisnormallypartofthestandardworkerscomppolicy.Aproblemarises,though,whenthestandardworkerscomppolicycannotbewritten,asforexamplewhentheworkerscompprogramisrunbythestatethroughamonopolisticstatefund.Whenthestaterunstheworkerscompprogram,employersliabilitycoverageisnotofferedbythestate,andinthatsituation,agapincoveragefortheemployerexists.Coverageknownas"stopgap"istheretoplugthatgap.Thisarticleoffersadescriptionofstopgapcoverage.

Notefirstofallthatstopgapcoverageisnotasubstituteforworkerscompensation(WC)coverage.Stopgapcoverageisdesignedtoprovideliabilityinsuranceforanemployerwhocanbesuedbyanemployeeinjuredinthecourseofemployment.Now,thestandardworkerscompensationpolicydoesprovideemployersliabilityinsurancewhichappliestosumsthattheemployerlegallymustpayasdamagesbecauseofbodilyinjurytoemployees;insuranceprotection,ineffect,foremployerswhoaresuedbytheiremployees.However,suchinsuranceisnotofferedundertheworkerscompprogramwritteninmonopolisticworkerscompensationstates,suchasOhio.Tofillthis"gap"inemployerprotection,stopgapcoverageshouldbepurchased.

Inthemonopolisticworkerscompstatefundsjurisdictions,employerscanpurchasestopgapcoveragefromprivateinsurerstogivethemselvesemployer’sliabilitycoverage(orself-insuretheexposure).Iftheemployerdoesbuystopgapcoverage,thecoveragecanbethesameasexistsunderthetermsoftheemployer’sliabilitysectionoftheworkcomppolicy;however,thetermsofstopgapcoveragedonotautomaticallymirrorthosefoundintheemployer’sliabilityinsurancepartoftheworkerscomppolicy.Stopgapcoverageisnotastandardizedpolicy-suchas,anISOpersonalautopolicyoracommercialgeneralliabilityform-andtheinsuredneedstoreadthespecificstomakesureheorsheisgettingthecoverageneededandrequested.



•SubscriptionforShares:InaRiskRetentionGroup(suchasPCIC)youneedtobecomeamember/subscriberinordertoaccessthelowpricedGLinsurance.Theshareshavenovalue.•Subrogation:Processbywhichoneinsurancecompanyseeksreimbursementfromanothercompanyorpersonforaclaimithasalreadypaid.Subrogationmeanscollectingmoneyfromtheresponsiblepartyinordertopayforthedamagetheycaused.Whenyousignedyourinsurancepolicy,yougaveyourinsurancecompanythisright.Afteryourinsurancepaysforyourdamage,yourinsurancecompanydemandsthattheresponsibleparty(ortheirinsurer)paysyourinsuranceback.•SubsidenceInsurance:Subsidenceinsuranceisatypeofpropertyinsurancethatpaysoutifthelandunderneathabuildingsubsides,orcollapses.•SubstandardInsurance:Insuranceissuedwithanextrapremiumorspecialrestrictiontothosepersonswhodonotqualifyforinsuranceatstandardrates.•SubstandardRisk:Anindividual,who,becauseofhealthhistoryorphysicallimitations,doesnotmeasureuptothequalificationofastandardrisk.•SunsetProvisionorClause:TheSunsetProvisionorClauseisnormally3yearsafteryourexpirationofthepolicy.Anditsetsalimitontheamountoftimethataclaimanthastosubmitorreportaclaimonapolicy.

WithaSunsetProvisionorClausethereisatimelimitonwhenaclaimcanbereportedandconsideredforcoverage.Ifyouarenotallowedtoreportaclaimperthepolicythenthereisnochancethatcoveragewouldapplyregardlessofwhentheoccurrencehappened.Soifthepolicyhasa3yearSunsetClause,afterthreeyearsnoclaimscanbereportedonthepolicy.Anydamagethatshowsupafterthethreeyearswouldnotbecovered.Forthisreason,ideallyyouwouldNOTwantasunsetclause.Thepolicywillnotprovideanycoverage,regardlessoftheothertermsandconditionsofthePolicy,includingthedefinitionof“occurrence”foranyclaimor“suit”ordemandfordamagesmadeagainstaninsuredunlesstheclaimor“suit”ordemandfordamagesisreportedinwritingwithinthespecifiednumberofyearsafterthePolicyPeriodorthestatestatuteoflimitationapplicabletoworkperformed,ifthatstatuteislessthanthespecifiednumberofyearsinthesunset.Thistypeofclauseisaprovisioninageneralliabilitypolicywhichstatesthattheinsurerwillrespondonlytolossesreportedbeforesomepredeterminedfuturedate(sunset),usuallyasetperiodaftertheexpirationofthepolicy.Solet'ssayyourgeneralliabilitypolicywaseffective4.1.07andexpires4.1.08,andhasa3-year"sunsetclause".Anyclaimmadeagainstthepolicyhastohave"occurred"duringthepolicyperiodandmustbe"made"nolaterthan4.1.2011.Soifa"latent"defectonworkperformedsometimewithintheyear:4.1.07to4.1.08isnotdiscovereduntilApril2,2011(3yearsand1dayafterexpiration)orlater,therewillbenocoverageunderthepolicy.Youmightwonderwhythisclaimwouldn'tbecoveredbythe4.1.11to4.1.12policy?Becausea"defectiveconstruction"claimisdeemedtohave"occurred"whentheworkisdone;thusthepolicythatshouldrespondisthe4.1.07to4.1.08one.Whenthereisnosunsetormanifestationclause,theclaimcanbe'made'anytimeinthefutureandyoucouldexpecttohavecoverage.•SuretyBond:Abondissuedbyanentity(Surety)onbehalfofasecondparty(Principal),guaranteeingthatthesecondpartywillfulfillanobligationorseriesofobligationstoathirdparty(Obligee).Intheeventthattheobligationsarenotmet,thethirdparty(Obligee)willrecoveritslossesviathebond(Surety),andtheSuretywillrecoverthoselossesfromthePrincipal.•Surety(Bond):Theparty(Inusrer)thatensuresthattheprincipal'sobligationswillbeperformed.Suppliesthebondasafinancialguaranteeoftheprincipal'scommitment.Suretybondcompaniestypicallyissuethebondandthusbecomeanintermediarybetweenthetwoparties(PrincipalandObligee).•SurplusLines:(1)Ariskorapartofariskforwhichthereisnonormalinsurancemarketavailable.(2)Insurancewrittenbynon-admittedinsurancecompanies.



•Syndicate:Agroupofinsurersorreinsurersinvolvedinjointunderwriting.Memberstypicallytakepredeterminedsharesofpremiums,losses,expenses,andprofits.Syndicates,morecommoninreinsurancethatinprimaryinsurance,areformedtocovermajorrisksthatarebeyondthecapacityofasingleunderwriter.-T-•TailCoverage:Youcanpurchasecoverageforanextendedreportingperiodbeyondyourpolicy’sexpirationdate,allowingcontinuouscoverageforanyclaimsthatmaybebroughtafteryourbusinesshasceased.Thisextension,knownas“tailcoverage,”typicallylastsfromonetofiveyears.Tailcoverageonlyincludesclaimsrelatedtoerrorsandomissionsthattookplaceafteryourretroactivecoveragedateofinceptionandwhileyourbusinesswasoperational;itdoesn’tcoverclaimsrelatedtoworkyoumaydoafteryourbusinesshasclosed.Costsfortailinsurancecoveragevary,ascantheamountoftimecoverageisextended,soaskyouragentorbrokerfordetails.•TemporaryTotalDisability(TTD):Thisbenefitispayablewhentheinjuredworkerisunabletoworkduringaperiodwhenhe/sheisunderactivemedicalcareandhasnotyetreachedwhatiscalled“maximummedicalimprovement”(MMI).Byvirtueofsimplecommonsense,once“maximummedicalimprovement”hasbeenreachedtheconditioncannolongerbecategorizedastemporary.•TemporaryPartialDisability(TPD):Anemployeemaybeeligiblefortemporarypartialdisabilitywhenheorsheisabletodosomeworkbutisstillrecuperatingfromtheeffectsoftheinjury,andis,thus,temporarilylimitedintheamountortypeofworkwhichcanbeperformedcomparedtothepre-injurywork.•Tenantsincommon:Aformofjointpropertyownershipinwhichtheownersmayhaveunequalsharesandwhichdoesnotinvolvearightofsurvivorship.•TenantsLegalLiability:TenantsLegalLiabilitycoverslegalliabilityfordamagestospacerentedorleasedtotheInsured.WhatexactlydoesthatmeanandhowisitapplicableinthemunicipalandNon-Profitworld?Ifthemunicipalityornon-profitorganizationisrentingspacethatisnottheirown,theycanbecomeresponsiblefordamagetothatspaceintheeventofaloss.TheCommercialGeneralLiabilityInsurancePolicywillnotrespondtothissituationbecauseofthecare,custodyandcontrolexclusionfoundinthatpolicy.AnendorsementcanbeaddedtothispolicycalledTenantsLegalLiability.Thisendorsementaltersthecare,custodyandcontrolexclusionandnowcoverscertainlosseslikefirethattherenterislegallyliableforThemunicipalityandnon-profitorganizationcanfindthemselvesoneithersidedependingontherentalsituation.Forexample,ifthemunicipalityownsthearenaandrentsspaceouttoagroup,themunicipalityshouldbeaskingthegroupforproofofTenant’sLegalLiability.Ontheotherhand,ifthemunicipalityisrentingspaceinatradeshow,theywillrequireTenant’sLegalLiabilitytobeincludedintheirCommercialGeneralLiabilityinsuranceintheeventthattheyarenegligentandcausedamagetothatrentedspace.Thelimitthatshouldberequestedorcarriedisthesamevaluethatitwouldcosttorebuildthespacethatthemunicipalityornon-profitorganizationisrenting.Forexample,iftheentirebuildingcosts$3,000,000torebuildbutonly1/3oftheareaorspaceisbeingrented,thenruleofthumbis,theTenantsLegalLiabilityshouldbesetat$1,000,000.(c/oAUMA)•TermUL(UniversalLife):Anewhybridlifeinsuranceproductthatgraftstermlifecoverageontoauniversallife,orUL,chassis.OnemajoradvantageoftheTermULframeworkisthatitallowsyoutoextendthetermofthepolicyonalevel-premiumbasisafteryouareintheplan,althoughthatlevelpremiumwillbebasedonyourageatthetimeyouextendthepolicy.Thisprovidestheplanningflexibilitythatterminsurancetraditionallylacksandcanbeafinancialbenefitshouldyourhealthdeclinetothepointthatyoubecomeuninsurabledowntheroad.



•TerrorismInsurance:Insurancepurchasedbypropertyownerstocovertheirpotentiallossesandliabilitiesthatmightoccurduetoterroristactivities.Forcommercialpolicies,aterroristattackhastobedeclareda“certifiedact”bytheSecretaryoftheTreasury.•ThirdParty:Theclaimantunderaliabilitypolicy.Socalledbecausethepersonmakingtheclaimisnotoneofthetwoparties,insuredandinsurer,totheinsurancecontract.•Thirdpartyclaim:ademandmadebyapersonagainstapolicyholderofanothercompanyandanypaymentthatwillbemadebythatcompany.•Threshold(No-Fault):Thepoint,measuredinmoney,timeorotherways,beyondwhichtortliabilitycanbeestablished.Untilthatpointisreached,reparationsmustbepaidwithintheprovisionsoftheno-faultplan,withnorecoursetothecourts.•TimeLimit:Theperiodoftimeduringwhichanoticeofclaimorproofoflossmustbefiled.•TitleInsurance:Titleinsuranceprotectsagainstlossesthatcouldoccurifyoudiscoverafterclosingonarealestatedealthatsomeoneelsecanclaimownershipofyourproperty.HowTitleInsuranceWorks:Youpayfortitleinsuranceinalumpsumwhenyoucloseonthepropertyandit'sbasedonthevalueoftheproperty.CoveragestartsonthedaythepolicyisRealestatedeedphotoissuedandextendsbackwardintime.Thisisdifferentfrompropertyorlifeinsurance,whichprotectsyouagainstlossesthatoccurafterthepolicyisissued.Titleinsuranceincludesasearchofpastdeeds,wills,andtruststoensurethatthetitlehaspassedtoeachnewownercorrectly.Thesearchalsoverifiesthatallliens,judgments,andpreviousmortgageshavebeenpaid.Asearchshoulduncovermanypotentialproblems,suchasrightsothersmayhold(e.g.rightsofways,vieweasements,powerlineeasements,mineralrights),claimsbypriorundisclosedheirs,andpendinglegalactions.Titleexaminersalsolookforunpaidtaxassessmentsoraneighbor’seasementforright-of-way.However,yourtitleinsurerwillnotprovideyouwithalistofwhattheyfindintheirsearch.Andtheirsearchdoesnotusuallyincludegovernmentzoningsorotherlanduseregulationsthatcouldimpactthemarketabilityanduseofyourproperty.WhenTitleInsuranceIsRequired:IfyouarebuyingrealestateinWashingtonstateandusingacommerciallendertofinancethepurchase,thelenderwillrequireyoutobuytitleinsuranceequaltotheamountoftheloan.Titleinsuranceprotectsthelenderuptotheamountofthemortgage,butitdoesn’tprotectyourequity.Inordertodothis,youneedanowner’stitlepolicyforthefullpriceoftheproperty.Generally,mostsellerspayfortheowner’spolicyaspartoftheirobligationtodeliveracleantitletothebuyer.Anowner’spolicycostsroughlyonehalfofonepercentofthepriceoftheproperty.Ifyourefinance,youwillneedtobuyanewtitleinsurancepolicyforthelender.Thispolicyprovidesthesamecoverageasthepreviouspolicyaswellasprotectsthelenderfromanyissuesthatmayhavearisensinceyouboughttheproperty,suchasliensoreasements.Ifyoupaycashforaproperty,youarenotrequiredtobuytitleinsurance.ChoosingaTitleInsuranceCompany:



Mostlendersorbrokerswillrecommendatitleinsurancecompany,butthefinalchoiceisyours.Unlikeothertypesofinsurance–suchasautoorhomeinsurance–titleinsurancecompaniesdonotmarkettheirproductsdirectlytotheconsumerswhopayforthem.Theysolicitbusinessfromrealestateagentsandagencies,banks,lenders,developersandothers.However,youpaythepremiumforthecoverage.Takethetimetoshoparound.Contactthecompaniesyouareinterestedinandcomparecostsandservices.Evenasmallvariationinpricecanmakeadifference.AdditionalTips:

• Makesurethetitlepolicyamountisforthefullvalueoftheproperty.• Checktoseethatthepolicydatematchestheclosingdateoftheescrow.• Thepolicymustdescribeallofthepropertyandinterestsyouarebuying.• Manytitleinsurersofferadiscountwhenbothalenderandanownerpolicyarepurchasedatthe

sametime.• Askyourtitleinsurerifyouqualifyforotherdiscounts.• Makesurethecompanyyouselectmeetsyourstandardsandthoseofyourlender.

•TIV:TotalInsuredValue•Tort:Acivilwrong,otherthanabreachofcontract,forwhichacourtoflawwillaffordlegalrelief,i.e.harminganotherbyanactofnegligenceindrivinganauto.•TotalDisability:Anillnessorinjurywhichpreventsaninsuredpersonfromcontinuouslyperformingeverydutypertainingtohis/heroccupationorengaginginanyothertypeofwork.(Thiswordingvariesamonginsurancecompanies.)•TotalInsurableValue(TIV):Apropertyinsurancetermreferringtothesumofthefullvalueoftheinsured'scoveredproperty,businessincomevalues,andanyothercoveredpropertyinterests.•TractWork(TractHousing/Subdivisions):Constructionworkperformedwithinastyleofhousingdevelopmentinwhichmultiplesimilarhomesarebuiltonatractoflandwhichissubdividedintoindividualsmalllots.Tracthousingdevelopmentmakesuseoffewarchitecturaldesigns,andlaborcostsarereducedbecauseworkersneedtolearntheskillsandmovementsofconstructingonlythosedesigns.Inaddition,asallhomesinthedevelopmentwillbebuiltatthesametime,thecostofpurchasingandtransportingbuildingsuppliesmaybereducedduetoeconomiesofscale.•TravelAccidentPolicy:Alimitedcontractcoveringonlyaccidentswhileaninsuredpersonistraveling,usuallyonacommercialcarrier.•TRIA(TerrorismRiskInsuranceAct):AUnitedStatesfederallawsignedintolawbyPresidentGeorgeW.BushonNovember26,2002.TheActcreatedafederal"backstop"forinsuranceclaimsrelatedtoactsofterrorism.TheActisintendedasatemporarymeasuretoallowtimefortheinsuranceindustrytodeveloptheirownsolutionsandproductstoinsureagainstactsofterrorism.UndertheTerrorismRiskInsuranceActof2002,asamendedpursuanttotheTerrorismRiskInsuranceProgramReauthorizationActof2007,effectiveJanuary1,2008(the"Ad'),youhavearighttopurchaseinsurancecoverageforlossesarisingoutofactsofterrorism,asdefinedinSection102(1)oftheAct:Theterm"certifiedactsofterrorism"meansanyactthatiscertifiedbytheSecretaryoftheTreasury-inconcurrencewiththeSecretaryofState,andtheAttorneyGeneraloftheUnitedStates-tobeanactofterrorism;tobeaviolentactoranactthatisdangeroustohumanlife,property,orinfrastructure;tohaveresultedindamagewithintheUnitedStates,oroutsidetheUnitedStatesinthecaseofcertainaircarriersorvesselsorthepremisesofaUnitedStatesmission;tohavebeencommittedbyanindividualorindividualsaspartofanefforttocoercethecivilianpopulationoftheUnitedStatesortoinfluencethepolicyoraffecttheconductoftheUnitedStatesGovernmentbycoercion.Youshouldknowthatwherecoverageisprovidedbythispolicyforlossesresultingfrom"certifiedactsofterrorism,"suchlossesmaybepartiallyreimbursedbytheUnitedStatesGovernmentunderaformulaestablishedbyfederallaw.However,yourpolicymaycontainotherexclusionswhichmightaffectyourcoverage,suchasanexclusionfornuclear



events.Undertheformula,theUnitedStatesGovernmentgenerallyreimburses85%ofcoveredterrorismlossesexceedingthestatutorilyestablisheddeductiblepaidbytheinsurancecompanyprovidingthecoverage.ThepremiumchargedforthiscoverageisprovidedanddoesnotincludeanychargesfortheportionoflossthatmaybecoveredbytheFederalGovernmentundertheAct.YoushouldalsoknowthattheAct,asamended,containsa$100BillionCapthatlimitsUnitedStatesGovernmentreimbursementaswellasinsurers'Liabilityforlossesresultingfrom"certifiedactsofterrorism"whentheamountofsuchlossesinanyonecalendaryearexceeds$100billion.IftheaggregateinsuredlossesforallInsurersexceed$100billion,yourcoveragemaybereduced.CONDITIONALTERRORISMCOVERAGEThefederalTerrorismRiskInsuranceProgramReauthorizationActof2007isscheduledtoterminateattheendofDecember31,2014,unlessrenewed,extendedorotherwisecontinuedbythefederalgovernment.ShouldyouselectTerrorismCoverageprovidedundertheActandtheActisterminatedDecember31,2014,anyterrorismcoverageasdefinedbytheActprovidedinthepolicywillterminate.•TripleNetLease:Aleaseagreementthatdesignatesthelessee(thetenant)asbeingsolelyresponsibleforallofthecostsrelatingtotheassetbeingleasedinadditiontotherentfeeappliedunderthelease.Thestructureofthistypeofleaserequiresthelesseetopayfornetrealestatetaxesontheleasedasset,netbuildinginsuranceandnetcommonareamaintenance.Thelesseehastopaythenetamountofthreetypesofcosts,whichhowthistermgotitsname.•TurnoverRate:Therateatwhichemployeesterminatecoveredserviceotherthanbydeathorretirement.Expectedfutureturnovercanbetakenintoaccountintranslatingcontributionsintobenefits.•Twisting:Thepracticeofinducingbymisrepresentation,orinaccurateorincompletecomparison,apolicyholderinonecompanytolapse,forfeitorsurrenderhisinsuranceforthepurposeoftakingoutapolicyinanothercompany.-U-•UsageBasedInsurance(UBI)&Telematics:Insurersintroducedtheseseveralyearsago,andtheyhaveincreasedinpopularity.Usage-basedinsuranceisalsocalled"pay-as-you-drive"insurance.Itreliesontheuseof“telematics”,thetransmissionofcomputerizeddataoveralongdistanceviawirelesstelecommunication.UBIprogramsweredevelopedbypersonalautoinsurers.Here'showapersonalprogramtypicallyworks.Theinsurerinstallsa"blackbox"inthepolicyholder'svehicle.Dependingontheinsurer,thedevicemaymeasurethedistancethevehicletravels,itsspeed,thedriver'sbrakinghabits,andthetimeofdaythecarisdriven.Theinsurerreviewsthedatatodeterminewhetherthepolicyholderhasearnedacredit.Acreditmaybeawardedifdriverhasdrivenonlyminimalmiles,hasnotsped,madejack-rabbitstarts,slammedonthebrakesordrivenattimes,suchastheweehoursofthemorning,whenaccidentsareparticularlylikelytohappen.UBIprogramsarenotpermittedinallstates.Ifyourbusinessownsmultiplevehicles,youcanusefleettelematicstooperatethemmoreefficiently.First,a"blackbox"iswiredintoeachofyourcompany'svehicles.Thedatafromthedevicescanbefedintoacentrallocation.Youcanusethisdataforavarietyofpurposes.Forinstance,youcanmonitorandimproveemployees'drivinghabits.Youcantracktheroutesyourdriverstaketodeterminewhethertheyareusingvehiclesefficiently.Youcanalsousethedatatoimprovefuelefficiencyandtoplanvehiclemaintenanceschedules.Finally,"blackboxes"haveGPScapabilities,soyoucanuseonetoquicklylocateastolenvehicle.Fleettelematicsmayearnyoudiscountsonyourcommercialautopremium.Commercialautoinsurersgenerallysupporttheuseoftelematicsbecausethedatayougathercanbeusedtoimproveyouremployees'drivinghabits.Moreover,peopletendtodrivebetterwhentheyknowtheyarebeing



monitored.Saferdrivershavefeweraccidentssoyourvehiclesshouldcostlesstoinsure.AskyourcommercialautoinsurerifitoffersaUBIprogramforbusinesses.Ifnot,checkouttheIntelledrivefleettelematicsprogramofferedbyTravelersInsurance.HartfordInsuranceoffersasimilarprogramcalledFleetAhead.Onemajorconcernwithtelematicsisprivacy.SomepolicyholdersavoidUBIprogramsbecausetheyfearinsurerswilluseGPStechnologytospyonthem.UBIisnotallowedinmystate(California).Evenifitwere,Iwouldn'trushtosignup.Ihaveagooddrivingrecordanddon'tdrivemuch,soaUBIprogrammightsavememoney.Still,doIwantmyinsurermonitoringmyeverymoveasIdrive?I'mnotsure.Privacyissomethingtoconsiderifyouarethinkingaboutimplementingfleettelematics.Howwillyouremployeesrespondto24/7monitoring?Youmaybeabletoovercomesomeprivacyconcernsbyinvolvingyouremployeesintheprogramdesignprocess.•UmbrellaLiability(ExcessLiabilityInsuranceorCommercialUmbrellaInsurance):Insureslossesinexcessofamountscoveredbyotherliabilityinsurancepolicies;alsoprotectstheinsuredinmanysituationsnotcoveredbytheusualliabilitypolices.WhatIsUmbrellaLiabilityInsurance?Umbrellaliabilityinsuranceforsmallbusinesses,alsoknownasexcessliabilityinsuranceorcommercialumbrellainsurance,providesadditionalprotectionwhenyourbusinessexceedsinsurancelimitsonanunderlyingpolicy.HowDoesUmbrellaLiabilityInsuranceProtectYourBusiness?Forasinglepremium,umbrellaliabilityorexcessliabilitypoliciesaddanotherlayerofprotectiontoanyofseveralotherpoliciesthatyoumighthold,includinggeneralliability,employer'sliability,andhiredandnon-ownedautoliabilitypolicies.Forinstance,ifyouhave$1millioningeneralliabilitycoverageandacoveredclaimissettledfor$1.5million,yoursmallbusiness’sumbrellaliabilityinsurancepolicywouldpickuptheadditionalamount.Excessliabilityinsuranceisgenerallythemostaffordablewaytogethigherpolicylimitsonseveralothersmallbusinessinsurancepolicies.However,youshouldnotethatumbrellaliabilityinsurancedoesnotextendthecoveragelimitsonanerrorsandomissionsorprofessionalliabilitypolicy.•UnearnedPremium:Theportionforaninsurancewrittenpremiumwhichisconsidered"unearned"bytheinsurer.Itisthewrittenpremiumlesstheearnedpremium.Theunearnedpremiumwouldbereturnedtotheinsuredifthepolicyiscanceledusingproratacancellationmethod,whenthepolicyiscancelledwithnopenalty.•Underwriter:1)acompanythatreceivesthepremiumsandacceptsresponsibilityforthefulfillmentofthepolicycontract;2)thecompanyemployeewhodecideswhetherornotthecompanyshouldassumeaparticularrisk;3)theagentwhosellsthepolicy.•Underwriting:Theprocessofselectingrisksforinsuranceanddetermininginwhatamountsandonwhattermstheinsurancecompanywillaccepttherisk.•Uninsured/UnderinsuredMotoristCoverage:Aformofinsurancethatpaysifthepersonatfaultdoesnothaveinsurance,orhasinadequateinsurancetocovertheaccident.MoreInformation…UninsuredMotoristBodilyInjury(UM)/UnderinsuredMotoristBodilyInjury(UIM):Thepolicyholderandpassengersinhis/hercararecoveredforbodilyinjurycausedbytheowneroroperatorofanuninsuredorinadequatelyinsuredautomobile.UninsuredMotoristPropertyDamage(UMPD):Thepolicyholderiscoveredforpropertydamagecausedbytheowneroroperatorofanuninsuredorinadequatelyinsuredautomobile.Insomestates,hit-and-run



isalsocoveredforactualvehicledamageevenifthatvehicledoesnothavecollisioncoverage(Forexample,Traveler’scoversthiswithadeductibleinWashingtonState–asof1.16.12).•UtilityServiceBusinessInterruption:Virtuallyallcommercialpropertypoliciescontainautilityservicesexclusion,whicheliminatescoverageforbusinessincomeandextraexpenselossthatresultsfromutilityservicefailurethatoriginatesawayfromtheinsured’spremises.Afireorotherperiloccursawayfromtheinsured’spremisesandcausestheinsured’selectricitytogoout.Theycannotoperatetheirmachinery,appliances,lighting,computersystemsorofficeequipmentcausingsignificantlossofincome.Thisexclusiongapfailstocoverbusinessinterruptionarisingfromutilityinterruptionthatoriginatesawayfromtheinsured’spremises,includingoverheadtransmissionlines.AddingadditionalcoverageforUtilityServiceBusinessInterruptionwilleliminatethisgapincoverage.-V-•VacantLandInsurance(PremisesLiability):Youmaybeleavingyourparceloflandundevelopedforanumberofreasons.Maybeonedayyouplanonbuildingasummercabinorretirementretreat.Nomatterwhatyourvacantlandisusedfor,youmightwanttoconsiderinsuringitagainstcertainrisks.Youcanalsobeheldresponsibleifsomeonegetsinjuredonyourlandevenifyoudidn'tgivehimpermissiontobethere…Fishing,hunting,lightningstrikesyourpropertyandthenignitesaflamethatburnsdownaneighboringhome,childrenplayingandgettinghurt,off-roadvehicleaccidents(ATV,Snowmobiles,etc.);Thesearejustsomeexamplesofwhyyouneedliabilityonyourvacantland.•VacantProperty(Building)Insurance:The"vacant"dwelling/buildingpolicyisstrictlyintendedtoprovidepropertyandliabilitycoveragefora"vacant"buildingthatwillhavenooccupancyoractivitywhatsoeverexcepttoshowtopotentialbuyersorrentersorforroutinemaintenance.The"vacantrenovationspolicy"isintendedtoprovidecoverageforabuildingthatwillhavenooccupancybutallowsforactivitiesrelatedtoremodelingorrenovatingorshowingtopotentialbuyersorrenters.•Vendor’sInsuranceEndorsement:ThiscoverstheVendorasAdditionalInsured.Vendorscoverageprotectssellersagainstclaimsarisingoutofthemanufacturer'sproduct.Thecoverageisnecessarybecauseasellermaybeliableiftheproductinjuresabuyerordamagesabuyer'sproperty.Thesellermaybeheldresponsibleeventhoughitdidn’tdesignormanufacturetheproduct,orchangeitinanyway.Amanufacturermayprovideaselleravendorsendorsementasameansofenticingthesellertodistributethemanufacturer'sproducts.Insomecases,adistributormayrefusetosellamanufacturer'sproductsunlessthelatteragreestoprovideavendorsendorsement.VinceownsVitalVacs,asmallcompanythatmakesvacuumcleaners.Thevacuumsaremarketedtopetownersbecausetheyhaveanattachmentthatisveryeffectiveatpickinguppethair.Vincehasbeensellinghisproductsthroughsmallappliancestoresandsaleshavebeengrowingsteadily.However,VincebelievesthatsaleswouldgrowmuchfasterifVitalVacs'productswereavailablefromA-1Appliance,alargechainofappliancestores.Abe,theownerofA-1Appliance,agreestostockVitalVacs’productsonatrialbasis.Inreturn,VincemustinsureA-1underavendorsendorsement.Whatisthisendorsementandwhatpurposedoesitserve?Vendorsendorsementsvary,butmostarebasedonthestandardvendorsendorsementpublishedbytheInsuranceServicesOffice(ISO).Thisendorsementisdesignedforvendorsthattransferaproduct“asis”fromthesellertothebuyer.Itcoversthevendorasanadditionalinsuredforclaimsallegingbodilyinjuryorpropertydamagethatarisesoutofthemanufacturer’sproducts,iftheproductsaredistributedorsoldintheregularcourseofthevendor’sbusiness.Theproductsthevendorissellingmustbedescribedintheendorsement.Likealladditionalinsuredendorsements,thevendorsendorsementcontainsexclusions.Theselimitthescopeofcoverageaffordedfortheinsuredvendor.Nocoverageappliestothefollowing:



• ContractualLiabilityTheendorsementexcludesdamagesforbodilyinjuryorpropertydamage

thatthevendorisobligatedtopaybecauseithasassumedliabilityforsuchdamagesinacontract.Forexample,supposethatA-1Appliancesubcontractswithanotherseller,TipTopTools,todistributetheVitalVacs'vacuumcleaners.TipTopagreestosellthevacuumsandinreturn,A-1willassumeliabilityforanyclaimsagainstTipTopthatariseoutofVitalVacsproducts.SupposeTipTopissuedbecauseofaproductdefectinaVitalVacsvacuumcleanerandpresentstheclaimtoA-1Appliance.A-1willhavenocoveragefortheclaimunderthevendorsendorsement.

• UnauthorizedWarrantiesNocoverageisaffordedforproductwarrantiesmadebythesellerthatarenotauthorizedbythemanufacturer.Forexample,asalesmanatA-1AppliancetellsacustomerthatVitalVacsvacuumcleanersaresafetousedirectlyonpets.VitalVacshasmadenosuchguarantee.Thecustomerbuysavacuumcleanerandinjureshisdogwhileusingthevacuumonit.IfA-1Applianceissuedforbreachofwarranty,theclaimwillnotbecoveredbythevendorsendorsement.

• Changes,InspectionsorRepackagingIfthevendorrepackagestheproductsorfailstomakeinspections,andissuedasaresult,theclaimswillnotbecoveredbytheendorsement.Alsoexcludedareanyphysicalorchemicalchangesthevendormakestotheproductintentionally.

• Demonstration,Installation,ServicingorRepairTheseactivitiesareexcludedunlesstheyaredoneatthevendor’spremisesinconnectionwithsaleoftheproduct.Forinstance,supposethatA-1AppliancedemonstratesVitalVacs'vacuumcleanersforcustomersinthestore.Ifacustomerisinjuredduringademonstration,andfilesaproductliabilitysuitagainstA-1Appliance,theclaimshouldbecovered.

• SoleNegligenceTheendorsementexcludesinjuryordamagecausedsolelybythevendor’snegligence.Forexample,supposethatA-1AppliancedisplaysVitalVacsproductsonashelfseveralfeetabovefloor-level.Acustomerisliftingacanistervacuumcleanerofftheshelfwhenthepowerbrushfallsonhimandcausesaninjury.IfthecustomerssuesA-1Applianceforbodilyinjury,theclaimmaynotbecoveredbecausetheinjuryresultedsolelyfromA-1'snegligentstorageoftheproduct.Anexceptionappliestoinjuryordamagethatresultsfromrepackaging,demonstration,installation,servicingorrepairbythevendor.If(inthepreviousexample)thepowerheadfellonthecustomerwhileA-1wasdemonstratingaVitalVacs'vacuumcleaner,theclaimwouldlikelybecovered.

• AnyInsuredFromWhomYouHaveAcquiredtheProductFinally,ifanyinsuredhassuppliedtheproduct,orpartsthereof,tothevendor,thatinsuredisnotcoveredundertheendorsement.

•VerbalThreshold:Inno-faultautoinsurancestateswithaverbalthreshold,victimsareallowedtosueintortonlyiftheirinjuriesmeetcertainverbaldescriptionsofthetypesofinjuriesthatrenderoneeligibletorecoverforpainandsuffering.•VesselSurvey:A"VesselSurvey"detailstheentirevesselandisverysimilartoa"Pre-PurchaseSurvey",onlyshorter.Agreatemphasisisplacedonsafetyandvalue.Thesafetyofthevesseloccupantsisofthemostconsiderationwheninsuringanyvessel.Thesecondmostimportantconsiderationisthevalueandconditionofthevessel.A"FairMarketValue"ofthevesselisalwaysobtainedinan"vesselsurvey".Thepricethesurveyorplacesonthevesselisgenerallywhatthevesselwillbeinsuredfor.Wheninsurancecompaniesarechanged,anewsurveyisgenerallyrequired.Aninsurancesurveymayalsocostslightlylessthanapre-purchasesurveysinceaseatrialmaynotbeneeded.Mostinsurancesurveysarerequestedbyboatownersandnotboatpurchases.Aboatownerusuallyknowswhatiswrongorwhatmayneedfixing.Whilea"Pre-PurchaseSurvey"willlisteverycosmeticdefectorfindingindetailwhereasan"InsuranceSurvey"willnot.Mostboats27'+andolderthan5or10yearswillrequireasurvey.Notalways,butmostofthetime..Itdependsonthecarrier.Andthatisnormallyforpersonalownership.



Ingeneral:Vessels26’andunderareconsidered“boats”.Vessels26’-27’canbeconsidered“boats”or“yachts”dependingonthecarrier.Vessels27’andoverareconsidered“yachts”.•ViaticalSettlement:Paymentofaportionoftheproceedsfromlifeinsurancetoaninsuredwhoisterminallyill.•Vicarious(Imputed)Liability:Thistermreferstoliabilitythatisimposedononepartybecauseofactionscommittedbysomeoneelse.Vicariousliabilityarisesbecauseofaspecialrelationshipthatexistsbetweentwoparties.Typically,oneparty(PartyA)exertssometypeofcontrolovertheother(PartyB)suchthatPartyBactsonPartyA'sbehalf.IfPartyBactsnegligentlyandinadvertentlycausesanaccidentthatinjuresPartyC,PartyAmaybeliableforPartyC'sinjury.PartyBmaybeliableeventhoughheorshepersonallydidnothingwrong.Vicariousliabilityisatypeofstrictliability,meaningliabilitythatisnotbasedonfault.Forexample,employersmaybeheldliablefornegligencecommittedbytheiremployeesunderalegaltheorycalledrespondeatsuperior(Latinfor"letthemasteranswer").Theemployer-employeerelationshipisoftencalledamaster-servantrelationship.Themaster(employer)hascontroloveritsservants(employees).Ifanemployeeisactinginthecourseofhisorheremploymentandnegligentlycausesanaccidentthatinjuresathirdparty,theinjuredpartymayseekrestitutionfromtheemployer.•VMMorV&MM:VandalismandMaliciousMischief-W-•Waiver:Anagreementattachedtoapolicywhichexemptsfromcoveragecertaindisabilitiesorinjuriesthatotherwisewouldbecoveredbythepolicy.•WaiverofSubrogation:Aspecialtypeofendorsementonaproperty-casualtyinsurancepolicy.TheWaiverofSubrogationprohibitstheinsurerfromattemptingtoseekrestitutionfromathirdpartywhocausesanykindoflosstotheinsured.Thistypeofarrangementisallowableundercertaincircumstanceswheretheinsuredcouldbeheldliableforaclaimthatispaid.Anagreementbetweentwopartiesinwhichonepartyagreestowaivesubrogationrightsagainstanotherintheeventofaloss.Theintentofthewaiveristopreventoneparty'sinsurerfrompursuingsubrogationagainsttheotherparty.Generally,insurancepoliciesdonotbarcoverageifaninsuredwaivessubrogationagainstathirdpartybeforealoss.However,coverageisexcludedfrommanypoliciesifsubrogationiswaivedafteralossbecausetodosowouldviolatetheprincipleofindemnity.AnexampleofWaiverofSubrogationcanbeseenwhereatenantrentsanapartmentfromalandlordandtakesoutarenter'sinsurancepolicy.Thelandlordmakesanagreementwiththetenantstatingthatthelandlordwillnotholdthetenantliableforanytypeofdamagetotherentalunit.Ifdamageoccurs,theinsurercouldpaytheclaimtothelandlordandthencomeafterthetenantforthedamage.ButaWaiverofSubrogationwouldpreventtheinsurerfrombeingabletodothis.•WarehouseLegalLiabilityInsurance:Itisaninsurancepolicythatprotectsyou,includinglegaldefense,intheeventyouareheldlegallyliablefordamagetoothersgoodsinyourcare,custody,orcontrol.•WholeLife:Alifeinsurancepolicythatremainsinforcefortheinsured'swholelifeandrequires(inmostcases)premiumstobepaideveryyearintothepolicy.•WorkersCompensation:Asystemestablishedunderstatelawthatprovidespayments,withoutregardtofault,toemployeesinjuredinthecourseandscopeoftheiremployment.•Workers'CompensationInsurance:Insuranceagainstliabilityimposedoncertainemployerstopaybenefitsandfurnishcaretoemployeesinjured,andtopaybenefitstodependentsofemployeeskilledinthecourseoforarisingoutoftheiremployment.Thesebenefitsareofferedtotheclaimantwhoguaranteestheywillnotsuetheemployerorstate.



Thecostofaworkers'compensationpolicy(thepremium)isbasedupontheemployer'spayroll,typeofbusinessrisk(classificationassignment),andtheemployer'slosshistory.Item3C(OtherStatesInsurance),foundontheinformationpageofaworkers’compensationpolicy,canbelookedatasacatchallorsafetynet.Typically,it’sherethatyouwillfindstateslistedwhereanemployermaybeginworkaftertheeffectiveorrenewaldateofaworkers’compensationpolicybutnotwheretheyhaveongoingoperations.Abitarchaicandcumbersomeatbest,theuseofItem3Cistheonlywayyoucanaddcoveragetoaworkers’compensationpolicyforOtherStatesCoverage.Thatiswhen,atthepolicyeffectiveorrenewaldate,anemployerdoesnothaveoperationsinthespecificstateinquestion.Letmetrythatagain…forthosestatesinwhichanemployerisactivelyconductingbusinessoperationsattheeffectiveorrenewaldateofthepolicytheymustbelistedinItem3A.(FormoreinformationonItem3Acheckoutthispreviouspost.)It’stheotherremainingstates,thosewheretheemployermay,atsometimeinthefutureconductbusinessoperations,thatmustbelistedinItem3C.Additionally,ifanemployerbeginsoperationsina3Clistedstate,thestandardpolicyrequirestheemployertonotifytheinsurancecompanyassoonasworkbegins.(RandySieberg,CIC,ARM,CRM)•Wrap-Up,CCIP/OCIP:“Wrap-Up”insurancecoversallpartiesinaconstructionprojectunderoneumbrellapolicy.Thewrappolicyincludestheowner,generalcontractor,sub-contractorsandallotherpartiesinvolvedintheconstructionproject.Thewrap-uporiginatedasatypeofconsolidatedinsuranceprogramthatcouldbeviewedasaContractor-ControlledInsuranceProgram(CCIP)oranOwner-ControlledInsuranceProgram(OCIP).OnaCCIP,responsibilityforprovidingprojectinsurancecoverageforallsubsresideswiththeGeneralContractor.OnanOCIP,theowneristhesponsorwhoprovidesinsuranceforallpartiesandtheownertakestotalresponsibilityfortheinsuranceprocurement,includingdirectpaymentofpremiums,alongwiththemanagementandadministrationoftheentireprogram.•Write-Your-Own(WYO)Program:AprogramavailableundertheNationalFloodInsuranceProgram(NFIP)whichallowsparticipatinginsurerstoissueNFIPfloodinsurancepolicies,incontrasttopoliciesissueddirectlybytheNFIP.WYOinsurerswritethecoverageontheirown"paper"buttheNFIPreinsures100percentofthecoverage.RegardlessofwhetherNFIPoraWYOinsurerissuesthepolicy,thecoverageprovidedisidentical.WYOinsurersemployexactlythesamepolicytermsthatareincludedinpoliciesissueddirectlybyNFIP.ThemajorityoffloodinsurancepoliciesarewrittenviatheWYOprogram.•WrittenPremium:Thisisthepremiumregisteredonthebooksofaninsurerorareinsureratthetimeapolicyisissuedandpaidfor.-X-•XCorXCUCoverage:XCUiscoverageforExplosion,CollapseandUnderground.Alongtimeago,thesecausesoflosswereexcludedinatypicalCGLpolicy.However,today,theyareINCLUDEDunlesstheyhavebeenspecificallyexcludedbyendorsement.Now,thesearethesortofclaimsthatthisinsuranceisdesignedtocover;Explosion-mostoftenassociatedwithblastingandanyresultingpropertydamagetoothers.Acondocomplexclientofminesuffered$25Kindamagewhenadeveloperdownthestreetdidsomeblasting.Collapse-imaginethatthereisastructurerightnexttothesinglefamilydwellingbeingdemolishedandduringtheprocess,asthedwellingcollapsed,itcausedpropertydamagetosurroundinghomes.Underground-damagetoundergroundcables,powerlines,sewerlines,andpipesasaresultofdemolition.Therecouldbeasinkholethecontractorisn'tawareofandwhenthehousecomesdown,thecitysewerlineisdamaged,orpowerlines,orgaspipelines,etc...(Expert:KristenMulcahy,CIC)





Health,Life&LongTermCareInsuranceTerms&DefinitionsCoinsurance...Copayment...EOB...PPO…PCY…Whatdoesitallmean?

BelowaresomestandardtermsanddefinitionsusedwhendescribingHealthandLifeInsurancecoverages.Whenreadingthedefinitions,pleasekeepinmindthatthisglossaryisprovidedasaguideonlycuratedfromvarioussources.Thesegeneraldefinitionsareprovidedforeducationalpurposes.Pleaserefertoyourpolicyorcertificateofinsuranceforexactdefinitionsoftermsandcoverageprovisions.Thedefinedtermsandcoverageprovisionsinyourpolicyorcertificateofinsurance,suchas"ReasonableandCustomary",maybedifferentfromthegeneralinformationprovidedbelow,andthepolicyorcertificatelanguagewillprevail.Pleasefurthernotethatdefinitionsandplanoptionsmayvarybystateandplan.

-A-•Acute(asopposedtoChronic):Anillnesstypicallywithasuddenonsetandresolvingafterasinglecourseoftreatmentortherapy.Manyareinfectiousinorigin.Examplesincludepneumonia,gastritis,urinarytractinfection,andminortraumanotrequiringsurgery.•AncillaryServices:Services,otherthanthoseprovidedbyaphysicianorhospital,whicharerelatedtoapatient’scare,suchaslaboratorywork,x-raysandanesthesia.-B-•BeneficiaryDesignations:Abeneficiaryisapersonorentitynamedtoreceiveaportionofthedeathbenefitofalifeinsurancepolicy.Theownerofalifeinsurancepolicymaynamemultiplebeneficiaries,andmostinsurancecompaniespermitthepolicyownertochangebeneficiaries.Therearetwotypesofbeneficiaries:primaryandcontingent.Aprimarybeneficiaryhasthefirstclaimtotheproceedsofalifeinsurancepolicyshouldtheinsureddie.Theremaybemorethanoneprimarybeneficiaryandtheproceedsdonothavetobesharedequally.Thepolicyownerofalifeinsurancecontractmayalsonameacontingentorsecondarybeneficiary.Thecontingentbeneficiaryhasclaimtoaportionofthedeathproceedsshouldtheprimarybeneficiary(s)beremovedordiepriortothedeathoftheinsured.Theremayalsobemorethanonecontingentbeneficiary.Manyindividualsdesignateaspouseastheprimarybeneficiaryoftheirlifeinsurancepolicyandthechildrenascontingentbeneficiaries.Youshouldconsultwithanestate-planningattorneypriortomakingaminorchildabeneficiaryofalifeinsurancepolicy.Inaddition,anyonecontemplatingmakingtheirestatethebeneficiaryoftheirinsurancepolicyshoulduseextremecautionandconsultwithanestateplanningattorneypriortodoingso.•Benefit:Theportionofservicesyourhealthplanpaysfor.•Benign(asopposedtoMalignant):Amildandnon-progressiveformofadisease.-C-•CalendarYear:TheperiodbeginningJanuary1ofanyyearthroughDecember31ofthesameyear.•CaseManagement:Aprocesswherebyacoveredpersonwithspecifichealthcareneedsisidentifiedandaplanwhichefficientlyutilizeshealthcareresourcesisdesignedandimplementedtoachievetheoptimumpatientoutcomeinthemostcost-effectivemanner.•CashSurrenderValue:Thesumofmoneyaninsurancecompanywillpaytothepolicyholderorannuity



holderintheeventhisorherpolicyisvoluntarilyterminatedbeforeitsmaturityortheinsuredeventoccurs.Thiscashvalueisthesavingscomponentofmostpermanentlifeinsurancepolicies,particularlywholelifeinsurancepolicies.Alsoknownas"cashvalue","surrendervalue"and"policyholder'sequity".•CatastrophicIllness:Asevereillnessrequiringprolongedhospitalizationorrecovery.Exampleswouldincludecoma,cancer,leukemia,heartattackorstroke.Theseillnessesusuallyinvolvehighcostsforhospitals,doctorsandmedicinesandmayincapacitatethepersonfromworking,creatingafinancialhardship.Theyarethetypeintendedtobecoveredbyhigh-deductiblehealthplans.Researchindicatesthattheunusualeconomicenvironmentofthedeliveryofcatastrophicillnesscareencouragestheuseofinnovativetherapies.Medicarecontainsabenefitforcatastrophicillness.•CertificateofCoverage:Adocumentgiventoaninsuredthatdescribesthebenefits,limitationsandexclusionsofcoverageprovidedbyaninsurancecompany.•Chronic(asopposedtoAcute):Acontinuingillnessthatmayormaynotimproveovertime.Chronicillnessescanlastfromweekstoyears.Examplesincludeheartfailure,COPD,leukemia,andmanyofthepsychiatricillnessessuchasdepressionandschizophrenia.•Claim:Informationamedicalproviderorinsuredsubmitstoaninsurancecompanytorequestpaymentformedicalservicesprovidedtotheinsured.•COBRA(ConsolidatedOmnibusBudgetReconciliationAct):AnInsuranceplanthattemporarilycontinuesyouremployer-sponsoredhealthbenefits.COBRAgivesworkersandtheirfamilieswholosetheirhealthbenefitstherighttochoosetocontinuegrouphealthbenefitsprovidedbytheirgrouphealthplanforlimitedperiodsoftimeundercertaincircumstancessuchasvoluntaryorinvoluntaryjobloss,reductioninthehoursworked,transitionbetweenjobs,death,divorce,andotherlifeevents.Qualifiedindividualsmayberequiredtopaytheentirepremiumforcoverageupto102percentofthecosttotheplan.Itprovidescoverageregardlessofpre-existinghealthconditions.Monthlypremiumsarepaidinfullbytheemployee.•Coinsurance:Theportionofcoveredhealthcarecostsforwhichthecoveredpersonhasafinancialresponsibility,usuallyafixedpercentage.Coinsuranceusuallyappliesaftertheinsuredmeetshis/herdeductible.Yourshareofthefeeforaservice.Ifyourplan’scoinsuranceshareis20%,youpay20%oftheallowablechargeandyourplanbenefitpaystheother80%oftheallowablecharge.•CoinsuranceMaximum:Apresetlimitafterwhichyourplanpaysat100%oftheallowablecharge.•Congenital:Aconditionthatexistedatbirth.Thisconditionmaybeinheritedormayhavedevelopedinthewomb.Althoughtheconditionexistedatbirthitmaynotbediscovereduntillaterinlife.•ConsolidatedOmnibusBudgetReconciliationAct(COBRA):Afederallawthat,amongotherthings,requiresemployerstooffercontinuedhealthinsurancecoveragetocertainemployeesandtheirbeneficiarieswhosegrouphealthinsurancehasbeenterminatediftheyundergoatriggeringevent.•ContractYear:Theperiodoftimefromtheeffectivedateofthecontracttotheexpirationdateofthecontract.•CoordinationofBenefits(COB):Aprovisioninthecontractthatapplieswhenapersoniscoveredundermorethanonemedicalplan.Itrequiresthatpaymentofbenefitsbecoordinatedbyallplanstoeliminateover-insuranceorduplicationofbenefits.•Copay(Copayment):Acost-sharingarrangementinwhichaninsuredpaysaspecifiedchargeforaspecifiedservice,suchas$10foranofficevisit.Theinsuredisusuallyresponsibleforpaymentatthetimetheserviceisrendered.Thischargemaybeinadditiontocertaincoinsuranceanddeductiblepayments.•CoveredPerson:Anindividualwhomeetseligibilityrequirementsandforwhompremiumpaymentsarepaidforspecifiedbenefitsofthecontractualagreement.-D-•Deductible:Theamountofeligibleexpensesacoveredpersonmustpayeachyearfromhis/herownpocketbeforetheplanwillmakepaymentforeligiblebenefits.•DeductibleCarryOverCredit:Chargesappliedtothedeductibleforservicesduringthelast3monthsofacalendaryearwhichmaybeusedtosatisfythefollowingyear’sdeductible.



•Dependent:Acoveredpersonwhoreliesonanotherpersonforsupportorobtainshealthcoveragethroughaspouse,parentorgrandparentwhoisthecoveredpersonunderaplan.•Diagnosed:Alicensedphysicianormedicalprofessionalhasidentifiedaspecificdiseaseormedicalcondition.•Disability:aphysicaloramentalimpairmentthatsubstantiallylimitsoneormoremajorlifeactivitiesofanindividual.Itmaybepartialortotal.(SeePartialDisability;TotalDisability.)•DisabilityBenefit:Periodicpayments,usuallymonthly,payabletoparticipantsundersomeretirementplans,ifsuchparticipantsareeligibleforthebenefitsandbecometotallyandpermanentlydisabledpriortothenormalretirementdate.•DisabilityIncomeInsurance:Aformofhealthinsurancethatprovidesperiodicpaymentstoreplaceincomewhenaninsuredpersonisunabletoworkasaresultofillness,injury,ordisease.

-E-•EffectiveDate:Thedateinsurancecoveragebegins.•EligibleDependent:Adependentofacoveredperson(spouse,child,orotherdependent)whomeetsallrequirementsspecifiedinthecontracttoqualifyforcoverageandforwhopremiumpaymentismade.•EligibleExpenses:Thelowerofthereasonableandcustomarychargesortheagreeduponhealthservicesfeeforhealthservicesandsuppliescoveredunderahealthplan.•EliminationPeriod[LTC]:Thelengthoftimebetweenwhenaninjuryorillnessbeginsandreceivingbenefitpaymentsfromaninsurer.Alsoknownasthe"waiting"or"qualifying"period,policyholdersmustintheinterimpayfortheseservicesandcanbethoughtofasadeductible.Optionsofteninclude7,30,60,90,180days,andinsomecases365days.•ExplanationofBenefits(EOB):Thestatementsenttoaninsuredbytheirhealthinsurancecompanylistingservicesprovided,amountbilled,eligibleexpensesandpaymentmadebythehealthinsurancecompany.-F-•FSA(FlexibleSpendingAccountorFlexibleSpendingArrangement):Isoneofanumberoftax-advantagedfinancialaccountsthatcanbesetupthroughacafeteriaplanofanemployerintheUnitedStates.AnFSAallowsanemployeetosetasideaportionofearningstopayforqualifiedexpensesasestablishedinthecafeteriaplan,mostcommonlyformedicalexpensesbutoftenfordependentcareorotherexpenses.Moneydeductedfromanemployee'spayintoanFSAisnotsubjecttopayrolltaxes,resultinginsubstantialpayrolltaxsavings.OnesignificantdisadvantagetousinganFSAisthatfundsnotusedbytheendoftheplanyeararelosttotheemployee.

-G-•GP(GeneralPractitioners):Amedicalpractitionerwhotreatsacuteandchronicillnessesandprovidespreventivecareandhealtheducationforallagesandbothsexes.-H-•HDHP(High-DeductibleHealthPlan):Ahealthinsuranceplanwithlowerpremiumsandhigherdeductiblesthanatraditionalhealthplan.BeingcoveredbyanHDHPisalsoarequirementforhavingahealthsavingsaccount.SomeHDHPplansalsoofferadditional"wellness"benefits,providedbeforeadeductibleispaid.High-deductiblehealthplansareaformofcatastrophiccoverage.•HomeHealthCareCoverage[LTC]:Long-termcareprovidedformallyinthehome,alsoknownashomehealthcare,canincorporateawiderangeofclinicalservices(e.g.nursing,drugtherapy,physicaltherapy)andotheractivitiessuchasphysicalconstruction(e.g.installinghydrauliclifts,renovatingbathroomsandkitchens).Theseservicesareusuallyorderedbyaphysicianorotherprofessional. Usually,thedollaramountavailableforHomeHealthCareisdeterminedbyselectingapercentageofthedailybenefitamountforNursingHomecoverage(e.g.50%,75%,80%or100%oftheNursingHomebenefit).Ifyou



prefertoreceivecareathome(whenfeasible),youmaywanttoselectaHomeHealthCarebenefitthatis100%ofthedailynursinghomebenefit.Ifcostisaconcern,choosingaHomeHealthCarebenefitof50%oftheselecteddailybenefitwilllowerthecostofthepremium.•HRA(HealthReimbursementAccountorHealthReimbursementArrangement):InternalRevenueService(IRS)-sanctionedprogramsthatallowanemployertosetasidefundstoreimbursemedicalexpensespaidbyparticipatingemployees.UsinganHRAyields"taxadvantagestooffsethealthcarecosts"forbothemployeesaswellasemployers.•HSA(HealthSavingsAccount):Atax-advantagedmedicalsavingsaccountavailabletotaxpayersintheUnitedStateswhoareenrolledinahigh-deductiblehealthplan(HDHP).Thefundscontributedtoanaccountarenotsubjecttofederalincometaxatthetimeofdeposit.Unlikeaflexiblespendingaccount(FSA),fundsrolloverandaccumulateyeartoyearifnotspent.HSAsareownedbytheindividual,whichdifferentiatesthemfromcompany-ownedHealthReimbursementArrangements(HRA)thatareanalternatetax-deductiblesourceoffundspairedwitheitherHDHPsorstandardhealthplans.HSAfundsmaycurrentlybeusedtopayforqualifiedmedicalexpensesatanytimewithoutfederaltaxliabilityorpenalty.However,beginninginearly2011OTC(overthecounter)medicationscannotbepaidwithHSAdollarswithoutadoctor'sprescription.Withdrawalsfornon-medicalexpensesaretreatedverysimilarlytothoseinanindividualretirementaccount(IRA)inthattheymayprovidetaxadvantagesiftakenafterretirementage,andtheyincurpenaltiesiftakenearlier.Theseaccountsareacomponentofconsumer-drivenhealthcare.•HMO(HealthMaintenanceOrganizationorDefinedNetwork):AnorganizationthatprovidesmanagedcareforhealthinsurancecontractsintheUnitedStatesasaliaisonwithhealthcareproviders(hospitals,doctors,etc.).Unliketraditionalindemnityinsurance,anHMOcoversonlycarerenderedbythosedoctorsandotherprofessionalswhohaveagreedtotreatpatientsinaccordancewiththeHMO'sguidelinesandrestrictionsinexchangeforasteadystreamofcustomers.MostHMOsrequirememberstoselectaprimarycarephysician(PCP),adoctorwhoactsasa"gatekeeper"todirectaccesstomedicalservices.PCPsareusuallyinternists,pediatricians,familydoctors,orgeneralpractitioners(GPs).Exceptingmedicalemergency,patientsneedareferralfromthePCPinordertoseeaspecialistorotherdoctor,andthegatekeepercannotauthorizethatreferralunlesstheHMOguidelinesdeemitnecessary.SomeHMOplansrequirethatyoufulfilladeductiblebeforeservicesarecovered.Othersonlyrequireyoutomakeacopaymentwhenservicesarerendered.HealthcareservicesobtainedoutsideoftheHMOaretypicallynotcovered,thoughtheremaybeexceptionsinthecaseofanemergency.-I-•InflationProtection[LTC]:Whenitcomestoinflationprotectionriders,therearefourmainchoices.Therearecommonchoicesfordifferentagegroups.Readmoretofindoutwhatoptionwillworkbestforyourlongtermcareinsurancepolicy.NoInflationProtection:Thefirstchoicewouldbetonotbuyinflationprotectionandjustpurchaseasmuchdailybenefitasyoucanpossiblyafford.Thisoptionisalmostalwaysforthemucholderbuyer.Ifyouare80orolder,thisiswhatwewouldsuggest.GuaranteePurchaseOption:Secondchoiceissomethingcalledtheguaranteepurchaseoption(GPO),sometimescalledCOLIorfuturepurchase.Thisiseitherbuiltinatnocostupfront,oraddsaminimalcharge(about2%orso).Withthisoption,offerswillbemadeeverytwotothreeyearsdependingonthecontracttoincreasethedailybenefitwithnoadditionalunderwriting.Thedownsidetothisoptionisthatthecostofeachincreasechosenisbasedonthenewageoftheinsured.Also,manyofthepolicieswillstoptheofferyouifhaverejectedittwoormoretimesorhavebeenonclaim.GPOisaverygoodchoiceforpeopleintheir70s.SimpleInflation:Thethirdoptioniscalledsimpleinflation.Thisusuallyaddsbetween40%and60%tothepremium.Simpleinflationincreasestheoriginaldailybenefitby5%everyyearautomatically.Thiswilldoublethedailybenefitin19andahalfyears.Itisusuallybestforpeopleintheir60s.CompoundInflation:Thelast,andmostwouldsaybestoption,iscompoundinflation.Thiscandouble



yourpremiumbutiswellworthit.Compoundinflationtypicallyadds5%tothedailybenefitandiscompoundedannuallysothedailybenefitdoublesin14andahalfyears.Sometimesweseecompoundinflationoptionsat3%,4%orevenlinkedtotheConsumerPriceIndex(CPI).Anyoneunder60yearsoldshouldseriouslyconsiderthecompoundoption.•Insured:Apersonwhohasobtainedhealthinsurancecoverageunderahealthinsuranceplan.-L-•LifeInsurance:LifeInsuranceisacontractbindingalifeinsurancecompanytocompensateabeneficiaryforthedeathofapersoninsured.Iftheinsureddiesthecompanywillprovideacashpaymenttothebeneficiary.Lifeinsuranceisusedtoprotecttheeconomicvalueofahumanlifewithregardstothosewhomaybefinanciallydependentuponit.

UsesofLifeInsurance:Lifeinsurancehasmanyusesforbothindividualsandbusinesses.Somecommonusesinclude…

IndividualUses:Lifeinsuranceusesforanindividual...

• Funeral-Lifeinsuranceproceedscanensurethatthereisenoughmoneyforproperfuneralandburialexpenses.

• Debt-Personalbills,creditcarddebt,studentloans,andpersonalnotescanbecoveredbylifeinsuranceintheeventofanindividual'sdeath.

• MortgageProtection-Theproceedsofalifeinsurancepolicycanpayoffthebalanceofamortgageorprovideanincomestreamtopaymonthlymortgageorrentpayments.

• IncomeReplacement-Intheeventofanindividual'sdeath,lifeinsuranceproceedscanprovideasupplementalincomestreamtoensurethatthesurvivingfamilymembersareabletomaintainthesamestandardofliving.

• Education-Lifeinsuranceproceedscanensurethattheeducationcostsoftheinsured'schildrenarecovered.

• Taxes-Federalestateandstateinheritancetaxescanbepre-fundedusinglifeinsurancetopreservethevalueofanestate.

• Donations/Gifts-Anindividualcanusealifeinsurancepolicytofundadonationtoacharityorleaveagifttoafamilymember.

BusinessUses:Lifeinsuranceusesforabusiness...

• Key-Person-Alifeinsurancepolicycanbeusedtoprotectabusinessfromthelossofincomeandprofitscausedbythedeathofakeyemployee.

• BusinessContinuation-Lifeinsurancecanbeusedtofundabuy/sellagreementorstockredemptionplantoenableapartnerorgroupofemployeestobuythebusinessinterestofadeceasedpartner.

• BusinessLoans-Lifeinsuranceprotectiononakeyemployeeorbusinessownercanbeusedtopayoffthedebtsofabusinessintheeventofthatindividual'sdeath.

• EmployeeBenefits-Lifeinsuranceprotectionforemployeesiscommonlyincludedincompanyemployeebenefitsplans.

DeterminingYourNeeds:Thereisnomagicformulatodeterminehowmuchlifeinsuranceyoushouldhave;however,thereareanumberoffactorsthatshouldbeconsideredwhenestimatinghowmuchlifeinsuranceyoushouldcarry.Theyinclude:



• FinalExpenses-Thesecouldbeunpaidhospitalbills,funeralexpenses,unpaiddebts,probate

costs,andestateandinheritancetaxes.• ReadjustmentFund-Thismaybeusedtocushiontheimmediatelifestyleadjustmentthata

familymustmakewhenalovedonedies.Thefamilymaybeforcedtomove,orthesurvivingspousemighthavetolookforanewjob.Inaddition,aworkingspousemayfinditdifficulttoreturntoworkimmediatelyafterthedeathofapartner.Thereadjustmentfundallowsforadequatebereavementduetoloss.

• SupplementalIncome-Afterthereadjustmentperiod,thereshouldbeaconsistentincomestreamtohelppayforthefamily'slivingexpenses,suchasmortgagepayments,monthlybills,anddaycare.

• EducationalFunds-Adequatefundsshouldbeavailableforthechildrens'education.Thismightincludeelementaryschool,highschool,andcollege.

• RetirementFund-Thereshouldalsobeadequatefundsavailabletoensurethatthespousecanretirecomfortably.

Thesearesomefactorsthatyoushouldconsidercarefullywhenestimatinghowmuchlifeinsuranceyouneed.Everyone'slifeinsuranceneedsaredifferentbut,ingeneral,anindividual'sneedsaregreatestfromthetimetheystarttheircareersorafamilyuntiltheyreachretirement,atwhichtimemanyindividuals'needsforlifeinsurancediminish.Itisimportanttorememberthatyoushouldreviewyourlifeinsuranceneedsannuallytoaccountforchangesinyourfamily'slifestyle.•LifeSettlement:Alifesettlementisatransactioninwhichalifeinsurancepolicyissoldbyonepartytoanotherparty.Thepurchasingpartyisaninvestorwillingtopaythesellerafeetopurchasethepolicyandinreturnisnamedthebeneficiaryandtakesonresponsibilityforpayingfuturepremiums.•LongTermCareInsurance:Aformofinsurancethathelpsprovideforthecostoflong-termcarebeyondapredeterminedperiod.Long-termcareinsurancecoverscaregenerallynotcoveredbyhealthinsurance,Medicare,orMedicaid.Individualswhorequirelong-termcarearegenerallynotsickinthetraditionalsense,butinstead,areunabletoperformthebasicactivitiesofdailyliving(ADLs)suchasdressing,bathing,eating,toileting,continence,transferring(gettinginandoutofabedorchair),andwalking.-M-•Malignant(asopposedtoBenign):Asevereandprogressivelyworseningformofadisease.•Medicare:Afederallysponsoredprogramforindividualsage65orolder,orwhohaveend-stagerenaldisease,oraredisabledasdefinedbySocialSecurity.MedicareandMedicaidaredifferent.•Medicaid:isastate-sponsoredprogramforindividualsandfamilieswhoqualifybasedonincomeandothercriteria.MedicaidandMedicarearedifferent.•Medicated:Adrugprescribedbyalicensedphysicianorotherlicensedmedicalprofessionalhasbeentakenforthetreatmentofamedical(includingmental)condition.•Monitored:Alicensedmedicalprofessionalhasassessedthestateofanexistingorpreviouslydiagnoseddiseaseorcondition,possiblyincludingdiagnostictestsorimaging.Aspecificconditionmustfirstbediagnosedtobemonitored.Monitoringdoesnotincluderoutinepreventivescreeningsthatarerecommendedforthegeneralpopulationintheabsenceofdiseasesuchasannualmammogramsforwomen.-N-•NursingHomeDailyBenefit[LTC]:Thisisthemaximumamountyourinsurancewillpayinanysingleday.•NursingHomeBenefitDuration[LTC]:Theamountoftimeyourpolicywillpayoutfromthepointofclaim.



-O-•Out-of-PocketMaximum:Thetotalpaymentsthatmustbepaidbyacoveredperson(i.e.,deductiblesandcoinsurance)asdefinedbythecontract.Oncethislimitisreached,coveredhealthservicesarepaidat100%forhealthservicesreceivedduringtherestofthatcalendaryear.•OTC(OverTheCounter):Medicationsthatcanbepurchasedwithoutaprescription.

-P-•ParticipatingProvider:Amedicalproviderwhohasbeencontractedtorendermedicalservicesorsuppliestoinsuredsatapre-negotiatedfee.Providersincludehospitals,physicians,andothermedicalfacilities.•PCIP-WA(Pre-existingConditionInsurancePlan/FederalHighRiskPool):Atemporaryfederalhighriskpool,called"Pre-existingConditionInsurancePlan,"isbeingoperatedalongsidethecurrentstatehighriskpool.Thefederalpoolhasbeencreatedbythenewfederalhealthreformlawtogiveindividualswithpre-existingconditionswhohavebeenuninsuredforatleastsixmonths,accesstohealthinsurance.•PCY:PerCalendarYear.•PhysicalTrauma:Aninjurytoanytissuebyphysicalorchemicalmeans.Thismayincludeabrasions,lacerations,incisions,orstab,puncture,orbulletwounds.Whentraumaoccurstothebone,thiscanresultinfractures,dislocations,orsprains.Traumacanalsobetheresultofexposuretotoxicchemicals,highheat,irradiation,orelectricalshockcausingdamagetotissuesandorgans.•POS(PointofService):POSplanscombineelementsofbothHMOandPPOplans.AsamemberofaPOSplan,youmayberequiredtochooseaprimarycarephysicianwhowillthenmakereferralstospecialistsinthehealthinsurancecompany'snetworkofpreferredproviders.Carerenderedbynon-networkproviderswilltypicallycostyoumoreoutofpocket,andmaynotbecoveredatall.•PPO(PreferredProviderOrganization):Ahealthcarebenefitarrangementwhichoffersinsuredsaccesstoparticipatingprovidersatreducedcosts.PPO’sprovideinsuredsincentives,suchaslowerdeductiblesandcopayments,touseprovidersinthenetwork.Thisisanarrangementdesignedtosupplyservicesatadiscountbyprovidingincentivesformemberstousedesignatedhealthcareproviders(whocontractwiththePPOatadiscount),butwhichalsoprovidescoverageforservicesrenderedbyhealthcareproviderswhoarenotpartofthePPOnetwork.Networkprovidersagreetonegotiatedfeesinexchangefortheirpreferredproviderstatus.•Provider:Aphysician,hospital,healthprofessionalandotherentityorinstitutionalhealthcareproviderthatprovidesahealthcareservice.•PCP(PrimaryCarePhysician):Aphysicianthatisresponsibleforproviding,prescribing,authorizingandcoordinatingallmedicalcareandtreatment.Adoctorwhoactsasa"gatekeeper"todirectaccesstomedicalservices.PCPsareusuallyinternists,pediatricians,familydoctors,orgeneralpractitioners(GPs).-R-•ReasonableandCustomary(R&C):Atermusedtorefertothecommonlychargedorprevailingfeesforhealthserviceswithinageographicarea.Afeeisgenerallyconsideredtobereasonableifitfallswithintheparametersoftheaverageorcommonlychargedfeefortheparticularservicewithinthatspecificcommunity.Thistermcanalsobereferredtoas"PrevailingRate","CoveredCharge","AllowableCharge"and/or"Usual""Reasonable"and"Customary"amount.•ReturnofPremium(ROP)TermLifeInsurancePolicy?:Areturnofpremiumtermlifeinsurancepolicytypicallyoffersaleveldeathbenefitwithfullyguaranteed*levelpremiumsforthefirst15,20,or30years,thoughthismayvarybycompanyandstate.Underthereturn-of-premiumfeature,thecumulativepremiumspaid,notincludingsubstandardandridercharges,willbereturnedattheendoftheleveltermperiodifthepolicyisinforceatthattime.Often,aportionofthecumulativepremiumswillbereturneduponsurrenderafterthepolicyhasbeeninforceforaspecifiednumberofyears.Mostreturnofpremiumlifeinsurancepoliciesallowforconversiontopermanentinsuranceofferedbythesamecompanyduringthecoveredperiodwithoutfurtherevidenceofinsurability.*guaranteessubjecttotheclaims-payingabilityoftheunderwritinginsurancecompany.



•Riders:The'living'partoflifeinsurancecontracts.Hereare3commonriders:

1. GuaranteedInsurabilityRider:Byenablingtheinsuredtopurchaseapre-determinedamountofadditionalcoverageduringafutureperiodthe'GIR'or'GIO'isalmosttoogoodtobetrue.Itcostsonlypenniesyetprovidesan"option"forsomeonewhosehealthhasdeteriorateddramaticallyorwhoselifehaschangedsignificantlytore-aligntheirriskprotectionwiththeiractualrisk.TheGIRisalsoaniftyfeatureforyouto"makeknown"whenyouarereviewingacontractthatyoudidnotinitiallysell-it'sagreatwayforyoutobetheexpert.And,itisafantasticwaytoleadintoapolicyreviewmeetingwithyourownclient.But,everycarrierandeveryproductisdifferent:whenitcanbeexercised,how,andatwhatrates.

2. ChildTermRider:Whileshunnedbynon-believersasmoneythatyouwouldneverwanttocollect,therealvalueoftheCTRisitsabilitytoconverttoamultipleoftheoriginalcoveragebetweenpre-determinedfutureagesoftheinsured.LikewiththeGIR,thisisespeciallybeneficialiftheinsured,whocouldnowbeintheir20's,hasanimmediateneedforinsuranceorhasadeteriorationofhealth(includingsomethingsimple,likegainingweight).Itguaranteeslowcostcoverageandsetsyourchilduptobearesponsibleownerofguaranteedlifeinsuranceforhisfamily.AswiththeGIR,CTR'svarybycarrierintheexactagesthattheycanbeexercised,thetermsoftheconversion,themultipleofthefaceamount,andthe'attained'vs'atissue'ratecardusedtodeterminetheconversioncost.Inshort,they'realotofworktomanageandreview.

3. SpouseInsuranceRider:Aswiththeaforementionedriders,carriersystemsarenotoriousfor'missing'alertsandrenewalswithrespecttospousaltermridersleadingtoexcessivepremiumsandsometimescashvaluedegradation;they,too,havespecificrenewals,conversionoptions,andsoforthwhichmuchberegularlyreviewed,compared,andshowntoyourclients,buttheytoooftentakeabackseattothe"primary"coveragedespitebeingjustas"primary"andperhapsonlybeingariderforthepolicyfeeadvantages.(c/oInforcePRO)

-S-•Second-to-DieorSurvivorshipLifeInsurance:Asecond-to-dielifeinsurancepolicyinsuresthelivesoftwopeople,typicallyahusbandandawife.Thedeathbenefitisnotpaidtothebeneficiaryuntilthedeathofthesecondinsured.Theselifeinsurancepoliciesaregenerallyavailableaseitherwholelifeinsuranceoruniversallifeinsurancepolicies,andpremiumsareoftenlessexpensivethanbuyingtwolifeinsurancepolicies.Second-to-dielifeinsurancepoliciesareeffectivetoolsoftenusedbywealthyindividualsinestateplanning.Theycanbeusedtopayforestatetaxes.Byremovingtheproceedsofalifeinsurancepolicythroughtheuseofgiftingpoliciesandthirdpartyownership,alifeinsurancepolicycanbeusedtopayforestatetaxes.Carefulplanningbyyourtaxandlegalcounsel,coupledwithaproperlystructuredsecond-to-dielifeinsurancepolicy,canhelpyoupreserveyournetworth.•SHQ(StandardHealthQuestionnaire):TheStandardHealthQuestionnaire(SHQ)isusedbyinsurancecarrierstodetermineeligibilityofpeoplewhoapplyforprivate,individualmedicalcoverage.Carriersarerequiredbylawtousethisquestionnaireanditsscoringsystemiftheysellplansforwhichyoucanberejectedbasedonyourhealth.Youmayonlyberejectedforcoverageifyouscore325ormorepoints.Ifyouarerejected,youareautomaticallyeligibleforcoveragefromWSHIP.WSHIPwascreatedbytheWashingtonlegislaturetoofferhealthinsurancetoresidentswhoarerejectedforindividualcoverage.•SettlementOptions:Thelifeinsurancepolicyownermaydesignateaspecificsettlementoptiontobepaiduponhisorherdeath.Ifthepolicyownerdoesnotchooseaspecificoption,thebeneficiary(s)willbegivenanumberofchoices.Theseusuallyinclude:

• LumpSumPayment-Thedeathproceedsofalifeinsurancepolicyarepaidtothebeneficiary(s)inonelumpsumpayment.



• FixedPeriodPayments-Thedeathproceedsofalifeinsurancepolicyarepaidtothe

beneficiary(s)forafixedperiod.• LifeIncomewithInstallmentsCertain-Thedeathproceedsofalifeinsurancepolicyarepaidto

thebeneficiary(s)ininstallmentpaymentsthroughacertainperiod.Afterthecertainperiod,paymentswillcontinuetobemadethroughoutthebeneficiary'slifetimebutthepaymentmayvaryfromthepaymentsduringthecertainperiod.

• InterestPayments-Thedeathproceedsofalifeinsurancepolicyremainwiththeinsurancecompanyandthecompanypaysthebeneficiaryinterestpayments.

• FixedInstallments-Thedeathproceedsofalifeinsurancepolicyarepaidtothebeneficiary(s)infixedinstallmentsuntiltheproceedsandinterestontheunpaidbalanceoftheproceedsareexhausted.

• SinglePremiumAnnuity-Theproceedsofalifeinsurancepolicyareusedtopurchaseasinglepremiumannuityfromtheinsurancecompany.

•SupplementalMedicalInsuranceand/orPayrollInsurance:Designedtoprovidecashwhenapolicyholderbecomesunabletoworkorcollectapaycheckfromanemployerforacoveredevent.Thistypeofpolicymayalsobeabletoprovidecashincomeinspecificsituationslikecancer,stroke,heartattackandtransplantsoperations.Whenthepolicyholderlosesasourceofincomeduetoacoveredevent,thecarriermayprovidecompensationtothepolicyholderthattheycanusetopaymedicalbills,buygroceries,paybillsorcoverday-to-daylivingexpenses.

-T-TermLifeInsurance:Termlifeinsuranceprovidesprotectionforaspecifiedperiodoftime.Adeathbenefitispaidtothebeneficiaryiftheinsureddieswithinaspecifiedperiodoftimewhilethepolicyisstillinforce.Manytermlifeinsuranceplanscanbeconvertedtopermanentlifeinsuranceplanswithoutevidenceofinsurability.Levelpremiumtermlifeinsurancehaspremiumswhichremainleveloveraspecifiedperiodoftime.Theseplanshavepremiumsthatremainlevelforaperiodof5,10,15,20,25,and30years.Aftertheinitiallevelperiodexpires,theannualpremiumincreaseseachyear,subjecttoaguaranteedmaximum.Ingeneral,termlifeinsuranceissuitablewhenyourlifeinsuranceneedsaretemporaryoryourlifeinsuranceneedsarelong-termbutyourbudgetdoesnotpermitthehigherpremiumsofpermanentlifeinsurance.•Treated:Alicensedphysicianorotherlicensedmedicalprofessionalhasrecommendedacourseofactionorperformedservicestoremedyadisease.Forexample,havingsurgeryandhavingadietandexerciseprogramdevelopedbyaphysicianarebothformsoftreatment.

-U-•Underwriting:Theactofreviewingandevaluatingprospectiveinsuredsforriskassessmentandappropriatepremium.•UniversalLifeInsurance:Universallifeinsuranceispermanentlifeinsurance.Aslongaspremiumsarepaid,adeathbenefitispaidtothebeneficiary.Thesepoliciesaredifferentfromwholelifeinsurancepoliciesbecausetheyofferthepolicyownersomeflexibilitytochangethepremiumpaymentsanddeathbenefit.Thedeathbenefitmaybeincreasedsubjecttoinsurabilityordecreased,andthepremiumscanalsobeincreasedanddecreasedaswellasskipped.Universallifeinsurancepoliciesmaybepurchasedwithoneoftwodifferentdeathbenefitoptions.Oneisaleveldeathbenefitandthesecondisanincreasingdeathbenefit.Althoughpremiumpaymentsareflexible,auniversallifepolicywillusuallyhaveatargetpremiumwhichisthesuggestedannualpremiumpayment.Thetargetpremiumforsome



companiesissufficienttokeepthepolicyin-forcetoage100;however,thisisnotguaranteed.Universallifeinsurancepoliciesalsoaccumulatecashvaluesonatax-deferredbasis.Thesecashvaluestendtobeinterest-sensitiveandcanbeusedforavarietyofoptions:

• Thepolicycanbesurrenderedatanytimeforthecashsurrendervalue.• Thepolicyownercantakeoutaloanandusethecashvalueascollateral.• Thepolicycanbechangedtoareducedamountpaid-upwholelifepolicy.• Thecashvaluesmaybeusedtopaypremiumsforacertainperiodoftime.• Thecashsurrendervaluecanbeusedtosupplementretirementincome.

Universallifeinsurancepoliciesarevaluablebecausetheycanprovidepermanentprotectionandaccumulatecashvaluesthatcanbeusedforemergenciesorformeetingspecificobjectives.Forthosewhopreferflexibility,universallifeinsuranceprovidesmoreoptionsthanwholelifeinsurance.Thecashvaluesofuniversallifeinsurancepoliciesmaybeaffectedbyalifeinsurancecompany'sfutureperformance.Somefactorsthatinfluencealifeinsurancecompany'sperformanceareexpenses,mortalityexperience,andinvestmentperformance.

-V-•VariableLifeInsurance:Variablelifeinsuranceispermanentlifeinsuranceandprovidesprotectionforlife.Aslongaspremiumsarepaid,adeathbenefitispaidtothebeneficiary.Thepremiumsforvariablelifeinsurancepoliciesaredesignedtoremainlevelovertime.Inaddition,thesepoliciesaccumulatecashvaluesonatax-deferredbasiswiththepotentialforhigherratesofreturnthantraditionalwholelifepolicies.Variablelifeinsurancepolicies'cashvaluesvarywiththeinvestmentresultsoffundschosenbythepolicyowner.Thepolicyownerisgivenachoiceofinvestmentoptionswhichareusuallystock,bondandmoneymarketfunds.Unlikewholelifeinsurancepolicieswhichhaveguaranteedcashvalues,thecashvaluesofvariablelifeinsurancepoliciesarenotguaranteed.Thecashvaluesofvariablelifeinsurancepoliciescanbeusedforavarietyofoptions:

• Thepolicycanbesurrenderedatanytimeforthecashsurrendervalue.• Thepolicyownercantakeoutaloanandusethecashvalueascollateral.• Thecashvaluesmaybeusedtopaypremiumsforacertainperiodoftime.• Thecashsurrendervaluecanbeusedtosupplementretirementincome.

Variablelifeinsurancepoliciesarevaluablebecausetheyprovidepermanentprotectionandmayaccumulatecashvalues;however,thesepoliciescarrymoreriskthantraditionalwholelifeinsurancepolicies.Individualsconsideringpurchasingavariablelifeinsurancepolicyshouldbeexperiencedinvestorsinequityinvestments.Thecashvaluesofvariablelifeinsurancepoliciesmayalsobeaffectedbyalifeinsurancecompany'sfutureperformance.Somefactorsthatinfluencealifeinsurancecompany'sperformanceareexpensesandmortalityexperience.•VariableUniversalLifeInsurance:Variableuniversallifeinsuranceispermanentlifeinsurance.Aslongaspremiumsarepaid,adeathbenefitispaidtothebeneficiary.Thesepoliciesaredifferentfromvariablelifeinsurancepoliciesbecausetheyofferthepolicyownersomeflexibilitytochangethepremiumpaymentsanddeathbenefit.Thedeathbenefitmaybeincreasedordecreased,andthepremiumscanalsobeincreasedanddecreasedaswellasskipped.Variableuniversallifeinsurancepoliciesmaybepurchasedwithoneoftwodifferentdeathbenefitoptions.Oneisaleveldeathbenefitandthesecondisanincreasingdeathbenefit.Inaddition,thesepoliciesaccumulatecashvaluesonatax-deferredbasis



withthepotentialforhigherratesofreturnthantraditionalwholelifepolicies.Thecashvaluesofvariableuniversallifeinsurancepoliciesvarywiththeinvestmentresultsoffundschosenbythepolicyowner.Thepolicyownerisgivenachoiceofinvestmentoptionswhichareusuallystock,bondandmoneymarketfunds.Unlikeuniversallifeinsurancepolicieswhichhaveguaranteedcashvalues,thecashvaluesofvariableuniversallifeinsurancepoliciesarenotguaranteed.Thecashvaluesofvariableuniversallifeinsurancepoliciescanbeusedforavarietyofoptions:

• Thepolicycanbesurrenderedatanytimeforthecashsurrendervalue.• Thepolicyownercantakeoutaloanandusethecashvalueascollateral.• Thecashvaluesmaybeusedtopaypremiumsforacertainperiodoftime.• Thecashsurrendervaluecanbeusedforretirementincome.

Variableuniversallifeinsurancepoliciesarevaluablebecausetheycanprovidepermanentprotectionandmayaccumulatecashvalues;however,thesepoliciescarrymoreriskthantraditionaluniversallifeinsurancepolicies.Individualsconsideringpurchasingavariableuniversallifeinsurancepolicyshouldbeexperiencedinvestorsinequityinvestments.Thecashvaluesofvariableuniversallifeinsurancepoliciesmayalsobeaffectedbyalifeinsurancecompany'sfutureperformance.Somefactorsthatinfluencealifeinsurancecompany'sperformanceareexpensesandmortalityexperience.

-W-•WholeLifeInsurance:Wholelifeinsuranceispermanentlifeinsuranceandprovidesprotectionforlife.Aslongaspremiumsarepaid,adeathbenefitispaidtothebeneficiary.Thepremiumsforwholelifeinsurancepoliciesaredesignedtoremainlevelovertime.Inaddition,thesepoliciesaccumulatecashvaluesonatax-deferredbasis.Therateofreturnonwholelifeinsurancecashvaluesisdependentuponanumberoffactorsincludingtheresultsofaninsurancecompany'sinvestmentperformance.Cashvaluescanbeusedforavarietyofoptions:

• Thepolicycanbesurrenderedatanytimeforthecashsurrendervalue.• Thepolicyownercantakeoutaloanandusethecashvalueascollateral.• Thepolicycanbechangedtoareduceddeathbenefitamountthatispaidup.• Thecashvaluesmaybeusedtopaypremiumsforacertainperiodoftime.• Thecashsurrendervaluecanbeusedtosupplementretirementincome.

Wholelifeinsurancepoliciesarevaluablebecausetheyprovidepermanentprotectionandaccumulatecashvaluesthatcanbeusedforemergenciesortomeetspecificobjectives.Thecashvaluesofwholelifeinsurancepoliciesmaybeaffectedbyalifeinsurancecompany'sfutureperformance.Somefactorsthatinfluencealifeinsurancecompany'sperformanceareexpenses,mortalityexperience,andinvestmentperformance.•WSHIP(WashingtonStateHealthInsurancePool/WashingtonStateHighRiskPool):TheStandardHealthQuestionnaire(SHQ)isusedbyinsurancecarrierstodetermineeligibilityofpeoplewhoapplyforprivate,individualmedicalcoverage.Carriersarerequiredbylawtousethisquestionnaireanditsscoringsystemiftheysellplansforwhichyoucanberejectedbasedonyourhealth.Youmayonlyberejectedforcoverageifyouscore325ormorepoints.Ifyouarerejected,youareautomaticallyeligibleforcoveragefromWSHIP.WSHIPwascreatedbytheWashingtonlegislaturetoofferhealthinsurancetoresidentswhoarerejectedforindividualcoverage.WSHIPisalsoresponsiblefortheformandcontentofthequestionnaireandforrecertifyingitevery36monthstoensurethatitmeetstherequirementsofstate



law.WSHIPdoesnotadministerorscorethequestionnaire;thecarrierprovidesandscorestheapplicant’squestionnaire.

AbovearesomestandardtermsanddefinitionsusedwhendescribingBusiness,Personal,Health,LifeandLongTermCareInsurancecoverages.Whenreadingthedefinitions,pleasekeepinmindthatthisglossaryisprovidedasaguideonlycuratedfromvarioussources.Thesegeneraldefinitionsareprovidedforeducationalpurposes.Pleaserefertoyourpolicyorcertificateofinsuranceforexactdefinitionsoftermsandcoverageprovisions.Thedefinedtermsandcoverageprovisionsinyourpolicyorcertificateofinsurance,suchas"ReasonableandCustomary",maybedifferentfromthegeneralinformationprovidedabove,andthepolicyorcertificatelanguagewillprevail.Pleasefurthernotethatdefinitionsandplanoptionsmayvarybystateandplan.

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