Glossary of Insurance Terms
Property Insurance – insures against damage to your property from certain events. Often referred to a first party coverage as payment is to the policyholder- you, the first party.
Inland Marine – insures against loss to property in transit or property that is not at a fixed location (example: contractors equipment), or property of others in your custody or unusual property.
Business Income Insurance – insures your loss of income or additional expense when your property is damaged by an insured event and the damage affects (stops or slows down) business operations.
Automobile Liability Insurance – protection for claims made against you for injury to others or damage to the property of others for which you are liable, caused by operation or use of vehicles—and should include vehicles that you may borrow or hire
Automobile Physical Damage Insurance – insures against damage to your vehicles caused by certain events. Referred to as comprehensive and collision coverage.
Commercial General Liability Insurance – protection for claims made against you for injury to others or damage to the property of others for which you are liable, caused by other than operation or use of a vehicle—examples are injury caused by your products or injuries that occur on your premises
Workers’ Compensation – protection for claims made against you as an employer by your employees for work related injuries. Actual amounts paid are prescribed by statute and include medical expenses and loss of wages incurred during a period of disability.
Umbrella Liability Insurance – liability coverage that protects above other liability policies (namely automobile liability and general liability policies) and serves to increase liability limits. Does NOT cover damage or destruction of your own property.
Crime Insurance – protects against employee theft as well as loss of cash, etc.
Directors & Officers Insurance – if shareholders (or others) sue directors or officers for mismanagement of the business, this policy will respond. It is not for injury to others or damage to the property of others, but pays for economic damages suffered by claimants due to the mismanagement of business.
Employment Practices Liability Insurance – relatively new policy that protects you against claims by others, including employees, for sexual harassment, wrongful termination, and discrimination in employment.
Professional Liability Insurance – a “malpractice” type of insurance for those who provide professional advice or services to others. Coverage is for claims that allege damage that is NOT injury to others or damage to the property of others. Example—architect’s error in design causes $50,000 additional cost for a change order to correct the design problem.
Pollution Liability Insurance – if you have chemical or petroleum storage tanks, this is the only policy that truly provides coverage for the potential environmental damage and clean-up costs that may result from a leak. Most other liability policies exclude pollution and environmental damage completely.
Bonds – Surety bonds guarantee the principal will perform the job as agreed. The surety financially backs the principal and either pays the bond amount to the obligee or pays for substitute performance IF the principal is unable to perform. An ERISA Bond is an Employee Dishonesty policy (See Crime) that is required by the Employee Retirement Income Security Act of 1974 to bond employee benefit plans against employee theft of plan assets.
Group Health – Group insurance provides for protection against financial loss resulting from expenses associated with illness or injury. Typically provided as a benefit by an employer to eligible employees, coverage may be through a standard insurance company, a service-type plan such as Blue Cross or through a Health Maintenance Organization (HMO).
Group Life Insurance – Group life insurance provides term life insurance protection on a low cost, uniform basis. Typically provided by employers as a benefit to eligible employees, coverage is limited in that coverage usually terminates when an employee terminates employment or retires.
Individual Life Insurance – generally two types:
Term Life Insurance – provides temporary coverage for a specified period of time (the policy term – which may be from 1 year to 30 years) with a level premium and level death benefit.
Term life insurance policies do not build up cash value, so once the policy terminates or ends, there is no surrender value or any further protection.
Permanent Life Insurance – provides a lifetime of insurance protection plus, under current tax laws, a tax-deferred buildup of cash value. The cash surrender value is available to the policyholder upon the surrender or lapse of the policy. Features of Permanent Life Insurance are:
— Policy loans
— Partial surrender value
Permanent Life Insurance includes Whole Life policies (growth of cash value guaranteed), Universal Life policies (growth of cash value based on market interest rates), and Variable Life policies (growth of cash value based on several investment options).