Glossary

236 terms defined in plain English. Each one links to the latest coverage in the index, and to the tools and guides that use it.

By topic

A

Actual cash value: A property valuation basis that pays the cost to replace damaged property minus depreciation for age and wear, not the price of a brand-new item.

Actual loss sustained: A way of paying business income claims with no dollar limit: the insurer reimburses documented lost income and expenses for a stated period.

Additional insured: A person or business added by endorsement to someone else's liability policy so it can claim directly for suits tied to the policyholder's work or premises.

Admitted insurer: An insurance company licensed by a state's insurance department to sell policies there, subject to that state's filing rules and guaranty fund protection.

Aggregate limit: The most an insurer will pay for all covered claims during a policy period, however many separate occurrences or claims there are.

Agreed value: A property policy option where insurer and insured agree on the covered value in advance, which suspends the coinsurance penalty for the agreed period.

AM Best rating: AM Best's letter-grade opinion of an insurer's financial strength and ability to pay claims, widely used by lenders and contracts as a minimum standard.

Applicable large employer (ALE): Under the ACA, an employer with an average of 50 or more full-time and full-time-equivalent employees in the prior year, subject to the employer mandate.

Appraisal: A property policy procedure for settling a dispute over the dollar amount of a loss, using two appraisers and an umpire instead of a lawsuit.

Assigned risk plan: A state-run residual market that provides workers' compensation to employers that cannot buy it from an insurer in the voluntary market.

Attachment point: The loss amount at which an excess, umbrella or reinsurance layer starts paying, normally the top of the underlying limits or retention beneath it.

B

Bailee: A person or business holding someone else's property temporarily, such as a repair shop, dry cleaner or warehouse, with a duty to care for it and return it.

Bid bond: A surety bond guaranteeing that a contractor who wins a bid will sign the contract and furnish the required performance and payment bonds.

Binder: Temporary written or oral evidence that coverage is in force on stated terms before the formal policy is issued.

Blanket limit: A single property limit applied across several buildings, locations or types of property, so the insurer pays a loss at any one up to the total.

Bodily injury: Physical injury, sickness or disease suffered by a person, including death resulting from it; the harm that triggers liability coverage for injuries.

Bonding capacity: The most bonded work a surety will back for a contractor, set as a limit per project and a total for all uncompleted bonded jobs.

Breach coach: A privacy attorney, usually from the cyber insurer's panel, who directs the first days of a data breach or ransomware response.

Builder's risk: Property insurance for a building under construction or renovation, covering the structure, materials and temporary works until completion or occupancy.

Business auto policy (BAP): The commercial policy covering liability and physical damage for vehicles a business owns, hires or borrows, with covered autos chosen by numbered symbols.

Business email compromise (BEC): Fraud in which a criminal impersonates an executive, vendor or client by email to trick an employee into sending money or changing payment details.

Business income: Property coverage that replaces net income and continuing operating expenses, including payroll, while a covered physical loss suspends operations.

Business overhead expense: Disability insurance that reimburses a disabled owner's fixed business costs, such as rent, utilities and staff salaries, while they cannot work.

Business owner's policy (BOP): A package policy that bundles commercial property, business income and general liability for small, lower-hazard businesses at a single premium.

Buy-sell agreement: A contract among a business's owners that sets who can buy a departing owner's share, at what price, and how the purchase is funded.

C

Captive agent: An insurance agent who sells for a single insurer or insurance group, as opposed to an independent agent who places business with several carriers.

Captive insurance company: A licensed insurer owned by the business or group it insures, formed to underwrite their own risks rather than buying all coverage from outside insurers.

Care, custody and control: A liability policy exclusion for damage to other people's property that the insured has in its possession or charge, such as a customer's car or goods.

Catastrophe bond: A security sold to investors that pays interest but loses principal if a defined catastrophe occurs, giving an insurer or reinsurer multiyear protection.

Catastrophe model: Software that simulates thousands of hurricanes, earthquakes and other disasters against a portfolio of locations to estimate insured losses and odds.

Causes of loss form: The part of a commercial property policy that lists which perils are covered, offered in basic, broad and special versions of increasing breadth.

Cedent: The insurer that passes part of its risk and premium to a reinsurer, and stays liable to its own policyholders for the whole.

Certificate of insurance: A one-page summary issued by an agent or insurer showing what coverage a business carried on the date issued, which confers no rights on the holder.

Civil authority: Business income coverage for a shutdown when a government order blocks access to your premises because of damage to nearby property.

Claims-made policy: A liability policy that covers claims first made against you and reported to the insurer during the policy period, whenever the underlying act occurred.

Class code: The numeric code that classifies a business's operations for rating, setting the workers' compensation rate per $100 of payroll.

COBRA: A federal law letting workers and families keep their employer's group health coverage for a limited time after a job loss or other qualifying event.

Coinsurance: A property policy condition requiring you to insure to a set percentage of value, or share the loss. (Health plans use the word for a cost share.)

Combined ratio: An insurer's claims costs plus operating expenses as a share of premium; below 100% means an underwriting profit and above 100% an underwriting loss.

Combined single limit: One dollar cap per accident on everything a liability policy pays for injuries and property damage together, instead of separate caps for each.

Commercial general liability (CGL): The standard business policy for claims that your operations, premises or products injured someone or damaged property, usually on ISO form CG 00 01.

Commercial multiple peril (CMP): A policy bundling property and liability coverage for one business, and the annual statement line insurers use to report that package business.

Commercial package policy: A policy made of two or more commercial coverage parts, such as property and general liability, sharing one set of declarations and common conditions.

Completed operations: Liability coverage for injury or damage that occurs after a contractor or service provider finishes a job and leaves, arising out of the finished work.

Computer fraud: A crime-policy coverage for money, securities or property lost when someone uses a computer to fraudulently move it out of your premises or accounts.

Concurrent causation: How a property loss is treated when a covered peril and an excluded peril combine to cause it, which court rules and policy wording answer differently.

Contingent business income: Coverage for income lost when physical damage at a supplier, customer or other business you rely on, not your own premises, slows or stops your operations.

Contractor's equipment: An inland marine coverage for the mobile machinery and power tools contractors move between job sites, which a standard property policy mostly leaves out.

Contractual liability: Responsibility you take on by agreeing in a contract to cover another party's losses, and the limited way a general liability policy responds to it.

Corporate-owned life insurance (COLI): Life insurance a company buys on its employees' lives, with the company as owner and beneficiary, often used to fund benefits or cover key people.

Cross-purchase agreement: A buy-sell arrangement in which each surviving owner personally buys a departing owner's share, usually funded by life insurance the owners hold on one another.

Cyber extortion: A demand for payment backed by a threat to encrypt, destroy or publish your data or disrupt your systems, and the cyber policy coverage that responds to it.

D

Damage to rented premises: A separate CGL limit that pays when you damage a building you rent, in the standard form by fire, despite the exclusion for property you rent or occupy.

DART rate: An OSHA incident rate counting injury and illness cases that caused days away from work, restricted duty or a job transfer, per 100 full-time workers.

Debris removal: Property coverage that pays to clear the wreckage of covered property after a covered loss, capped at a share of the loss plus a fixed extra amount.

Declarations page: The front section of a policy that names the insured, policy period, covered locations or operations, limits, deductibles, premium and the forms attached.

Deductible: The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss.

Defense costs: The attorney fees, expert fees and other expenses of fighting a claim, which some policies pay on top of the limit and others deduct from it.

Dependent business interruption: Cyber coverage for income lost when an outage or attack at a provider you rely on, such as a cloud host or payment processor, halts your operations.

Difference in conditions (DIC): A stand-alone property policy that fills gaps in a primary policy, usually adding flood, earthquake and broader terms, often from surplus lines insurers.

Diligent search: The effort a surplus lines broker must make to find coverage from admitted insurers before placing a risk with a non-admitted insurer.

Directors and officers (D&O) insurance: Liability insurance protecting a company's directors and officers, and often the company itself, against claims alleging wrongful acts in managing the business.

Duty to defend: A liability insurer's obligation to pay for your defense of a lawsuit that could potentially fall within coverage, which is broader than its duty to pay.

Duty to indemnify: The insurer's obligation to pay a covered judgment or settlement against you, decided on the facts established rather than the complaint's allegations.

E

Earned premium: The share of a policy's premium that matches the coverage period already elapsed, which an insurer can book as revenue and keep if the policy ends early.

Employee benefits liability: Coverage for claims that an employer's negligent mistakes in administering employee benefit plans, such as failing to enroll someone, caused a loss.

Employee dishonesty: Crime coverage for money, securities or other property lost through dishonest acts by your own employees, intended to harm you and benefit them.

Employers' liability: The part of a workers' compensation policy covering suits over workplace injuries that fall outside the comp system, such as third-party-over claims.

Employment practices liability (EPLI): Claims-made coverage for employee lawsuits alleging discrimination, harassment, wrongful termination, retaliation and similar wrongful employment acts.

Endorsement: A written amendment to an insurance policy that adds, removes or changes coverage, limits or conditions, and controls over the base form where they conflict.

Entity redemption: A buy-sell arrangement in which the business itself buys a departing owner's interest, usually funded by company-owned life insurance on each owner.

Equipment breakdown: Coverage for sudden damage to mechanical, electrical and pressure equipment such as HVAC units and boilers, plus the spoilage and income losses that follow.

ERISA: The 1974 federal law setting fiduciary, reporting and disclosure standards for private-sector retirement and welfare benefit plans, enforced by the DOL.

ERISA bond: A fidelity bond ERISA requires for people who handle benefit plan funds, protecting the plan from theft or fraud and set at 10% of the funds handled.

Errors and omissions (E&O): Insurance for claims that a professional or service business's mistakes, missed work or bad advice caused a client a financial loss.

Excess and surplus lines: Insurance placed with non-admitted insurers for risks the standard market declines or cannot price, with freer forms and rates but less regulatory protection.

Excess liability: Liability coverage that pays only after the limits of underlying policies are used up, adding limit above them without necessarily broadening the terms.

Exclusion: A policy provision that removes coverage for specified perils, property, people or types of loss that the insuring agreement would otherwise include.

Experience modification rate (EMR): A multiplier on workers' compensation premium comparing an employer's actual claim losses with the losses expected for its industry and size.

Exposure base: The measure of a business's size or activity, such as payroll, sales or square footage, that is multiplied by a rate to produce a premium.

Extended reporting period: A window after a claims-made policy ends during which claims can still be reported for incidents that happened while the coverage was in force.

Extra expense: Property coverage for the added costs of staying open after a covered loss, such as a temporary location, rented equipment or overtime.

F

Facultative reinsurance: Reinsurance negotiated for one specific risk or policy rather than a whole book of business, usually because the risk is large or unusual.

Fidelity bond: A two-party bond that works like insurance, reimbursing an employer or its clients for theft and other dishonest acts by employees.

Fiduciary liability: Coverage for claims that the people running an employee benefit plan breached their duties, such as imprudent investments, excess fees or administrative errors.

First named insured: The party listed first as a named insured on the declarations, who the policy treats as the contact for premium, cancellation notices and changes.

First-party coverage: Insurance that pays the policyholder directly for its own losses, such as damaged property or breach response costs, rather than defending claims by others.

Fleet: A group of business vehicles insured together under one commercial auto program, often five or more, and rated more on the group's losses than on any one unit.

Following form: An excess or umbrella policy that adopts the terms, conditions and exclusions of the policy beneath it, except where its own wording says otherwise.

Forgery and alteration: A crime coverage that pays when a check, draft or promissory note you issued is forged or altered, plus the cost of defending a suit over it.

Fronting: An arrangement where a licensed insurer issues the policy but passes most or all of the risk to a captive or reinsurer, for a fee.

Full-time equivalent (FTE): A way to convert part-time hours into the number of full-time workers they equal, used to decide whether the ACA employer mandate or a tax credit applies.

Funds transfer fraud: Crime coverage for money taken from your bank account by a fraudulent instruction to your bank that you did not send or approve.

G

Garagekeepers coverage: Coverage for damage to customers' vehicles while they are in your care, such as at a repair shop, parking lot, car wash or valet stand.

General aggregate: The most a general liability policy pays in one policy period for all claims other than products-completed operations, however many occurrences there are.

General average: A maritime principle under which everyone with an interest in a voyage shares, in proportion to values saved, the cost of a sacrifice made to save the venture.

General indemnity agreement: The contract in which a bonded business, and usually its owners, promise to reimburse a surety for any bond losses and costs.

Guaranty fund: A state-created safety net that pays covered claims, up to statutory limits, when an admitted insurer becomes insolvent.

H

Hammer clause: A policy provision that caps the insurer's payments if you refuse a settlement it recommends, leaving you to bear the extra cost of going on.

Hard market: The phase of the insurance cycle when premiums rise, coverage tightens and insurers cut capacity and become pickier about who they will insure.

Health reimbursement arrangement (HRA): An employer-funded plan that reimburses employees tax-free for medical expenses and, in some versions, individual health insurance premiums.

Health savings account (HSA): A tax-advantaged personal account for medical costs that is open only to people enrolled in a qualifying high-deductible health plan.

Hired and non-owned auto: Liability coverage for accidents in vehicles your business rents or borrows, or that employees and others use on your behalf but you do not own.

Hold harmless agreement: A contract clause in which one party agrees to take on another party's liability for specified claims, usually those arising from the first party's work.

I

ICHRA: An employer-funded account that reimburses employees tax-free for individual health insurance premiums they buy themselves, with no federal dollar cap.

Incurred but not reported (IBNR): An estimate of losses that have already happened, but that the insurer or plan has not yet been told about or has not fully valued.

Indemnity: The principle that insurance restores your financial position after a loss, no better and no worse; also a contract promise to make good another's loss.

Independent agent: A licensed agent who works for an agency, not an insurer, sells policies from several carriers, and usually owns the client relationship and renewals.

Independent medical examination (IME): A one-time exam of an injured worker by a physician who is not treating them, used to assess diagnosis, cause, treatment needs, impairment and ability to work.

Inland marine: Property coverage for goods in transit, movable equipment and certain specialty property, written outside the standard building and contents forms.

Insurable interest: A real financial stake in the thing insured, such that you would lose money if it were damaged or a person died; without one a policy generally cannot pay.

Insurance to value: Carrying a property limit that matches the full value of what you insure, so a loss is paid in full and no coinsurance penalty applies.

Insured contract: A contract in which you assume another's tort liability, which the CGL covers despite its contractual liability exclusion if it fits a listed type.

Insured vs insured exclusion: A D&O exclusion removing coverage for claims brought by one insured against another, such as a company suing its own directors.

ISO (Insurance Services Office): The Verisk business that publishes the standard commercial policy forms, rules, classifications and loss costs most U.S. property and casualty insurers use.

J

Jones Act: A federal law letting injured seamen sue their employer for negligence, which replaces workers' compensation for crew members of vessels.

K

Key person insurance: Life or disability insurance a business owns on a critical owner or employee, paid to the business to offset the financial hit of losing that person.

L

Large deductible program: A policy where the insurer pays claims and then bills you for losses up to a high per-claim deductible, in return for lower premium and secured collateral.

Level-funded plan: A self-funded health plan with one fixed monthly payment covering expected claims, fees and stop-loss premium, with possible refunds if claims run low.

License and permit bond: A surety bond a government agency requires before issuing a license or permit, guaranteeing the holder will follow the law and pay those harmed.

Light duty: Temporary, modified work offered to an injured employee whose doctor has set restrictions, so the person stays on the job while recovering from a work injury.

Liquor liability: Coverage for injury or damage caused by an intoxicated person that an alcohol-selling business served, which a general liability policy excludes for sellers.

Loss adjustment expense: What an insurer spends to investigate, defend and settle claims, apart from the claim payments themselves. Split into allocated and unallocated expense.

Loss control: The inspections, safety programs and physical improvements that a business and its insurer use to make claims less frequent and less severe.

Loss ratio: Incurred claim costs divided by earned premium, shown as a percentage; the basic gauge of whether the premium collected is covering claims.

Loss run: An insurer-issued report listing every claim on a policy over a period, with dates, amounts paid, reserves held and whether each claim is open or closed.

M

Managing general agent (MGA): An agency or underwriting firm that an insurer authorizes by contract to quote, bind and issue policies for a defined book, sometimes handling claims too.

Manuscript policy: An insurance policy whose wording is drafted or heavily negotiated for one insured rather than taken from a standard ISO or insurer form.

Maximum medical improvement (MMI): The point in a work injury when the condition has stabilized and further recovery is not expected, so permanent impairment can be measured and rated.

MCS-90: A federal endorsement on a trucker's liability policy that guarantees payment of judgments to the public up to the federal minimum, even for excluded losses.

Medical payments coverage: No-fault liability coverage that pays small medical bills for people hurt on your premises or by your operations, whoever was at fault.

Minimum earned premium: A policy provision letting the insurer keep a stated percentage of the full premium if the policy is cancelled early, however little of the term has elapsed.

Monoline policy: A policy covering just one line of insurance, such as general liability or commercial property, instead of a package or BOP combining several coverages.

Monopolistic state fund: A government-run workers' comp fund that is the exclusive source of coverage in its state; employers buy from it or self-insure, not from private carriers.

Motor truck cargo: Coverage for a trucker's legal liability when a customer's freight is lost, stolen or damaged while in the carrier's care during transport.

Multi-factor authentication (MFA): A login check that requires two or more kinds of proof, such as a password plus a code or device, and a control cyber insurers now expect.

N

Named insured: The person or entity identified as the insured in the policy's declarations, which holds the coverage and its duties; others qualify only if the policy says so.

Named perils: Property coverage that pays only for losses caused by perils the policy lists, such as fire, lightning and windstorm; an unlisted cause is not covered.

Named storm deductible: A separate deductible, usually a percentage of insured value, for wind damage from a named hurricane or tropical storm, replacing the flat deductible.

NCCI: The National Council on Compensation Insurance, the rating and data organization behind workers' comp class codes, loss costs and mods in most states.

Newly acquired property: A property policy extension that automatically covers buildings and contents you buy or build after the policy starts, for a short time and up to a set limit.

Non-admitted insurer: An insurer not licensed in your state that may still write coverage there through a surplus lines broker, outside the state's rate and form filing rules.

Notice of claim: The report a policyholder must give an insurer about a loss, claim or lawsuit. The policy sets the timing, and late notice can put coverage at risk.

Nuclear verdict: A jury verdict of $10 million or more against a business, far above what the economic losses would suggest, that pushes up liability and umbrella costs.

O

Occurrence: In liability insurance, the event that triggers coverage and determines which limit and deductible apply; the ISO CGL form defines it as an accident.

Occurrence policy: A liability policy that covers injury or damage happening during the policy period, no matter when the claim is made, even after the policy has expired.

Ocean marine: Insurance for ships, their cargo and the liabilities of shipowners and shippers at sea; one of the oldest forms of insurance and separate from inland marine.

Ordinance or law: Coverage for the extra cost of rebuilding to current building codes after a covered loss, which a standard property policy excludes or sharply limits.

Ordinary payroll: In a business income policy, rank-and-file wages and related costs that coverage can keep paying during a shutdown, often for a limited number of days.

OSHA recordable injury: A work-related injury or illness meeting OSHA's recording criteria, such as lost time, restricted duty or care beyond first aid, entered on the OSHA 300 log.

Other insurance clause: A policy condition that decides which policy pays first, or how insurers share the cost, when more than one policy covers the same loss.

Other states coverage: Workers' comp protection in Part Three of the standard policy that can apply in a state not listed in Item 3.A when you begin work there during the policy term.

P

Parametric insurance: Coverage that pays a pre-agreed sum when a measured event, such as a wind speed or earthquake magnitude, crosses a set threshold, without proof of actual loss.

Pay-as-you-go: A workers' comp billing arrangement where premium is calculated and paid each pay period on actual payroll, rather than as a large deposit trued up at audit.

Payment bond: A surety bond guaranteeing a contractor will pay its subcontractors, laborers and suppliers on a project; unpaid parties can claim against the bond.

Per-occurrence limit: The most a liability policy will pay for all damages arising from a single occurrence, however many people are hurt or claims are made.

Performance bond: A surety bond guaranteeing a contractor will finish a project under its contract; if it defaults, the surety completes the work or pays the owner.

Period of restoration: In a business income policy, the time for which lost income is covered, from a waiting period after damage until repairs should be done or operations resume.

Permanent partial disability: A workers' comp benefit for a lasting impairment that limits but does not end a worker's ability to work, set by an impairment rating or state schedule.

Personal and advertising injury: CGL coverage for listed offenses such as defamation, invasion of privacy, wrongful eviction, false arrest and copying another's advertising idea or slogan.

Pollution exclusion: A policy exclusion removing coverage for injury, damage and clean-up from the release of pollutants, leaving spills to a separate pollution policy.

Premises liability: A property owner's or occupier's legal responsibility for injuries to visitors caused by unsafe conditions on the property, insured mainly under the CGL.

Premium audit: The insurer's after-the-fact review of payroll, sales or other exposures that replaces the pricing estimates, producing an additional or return premium.

Premium finance: A loan from a licensed finance company that pays an insurance premium up front, repaid by the policyholder in installments with a finance charge.

Primary and noncontributory: Wording that makes your liability policy respond first to a party you named as an additional insured, without drawing on that party's own insurance.

Prior acts coverage: Coverage under a claims-made policy for wrongful acts committed before the policy began, reaching back to its retroactive date or without a limit.

Probable maximum loss (PML): An estimate of the largest loss a location, portfolio or event is likely to produce, used to set limits, size reinsurance and satisfy lender requirements.

Product liability: A manufacturer's, distributor's or seller's legal responsibility for injury or damage caused by a defective or unreasonably dangerous product.

Products-completed operations aggregate: The most a general liability policy pays per policy period for injury or damage in the products-completed operations hazard, apart from the general aggregate.

Professional employer organization (PEO): A firm that co-employs your staff and runs payroll, taxes, benefits and workers' comp under its own accounts for a per-employee fee or share of payroll.

Professional liability: Coverage for claims that a professional's advice, design or service was negligent, incomplete or not delivered as promised and cost a client money.

Proof of loss: A signed, sworn statement detailing a property loss and the amount claimed, which the policyholder gives the insurer within a set period after it asks.

Property damage: In liability policies, physical injury to tangible property including its loss of use, or loss of use of tangible property that was not physically injured.

Protection class: A 1-to-10 grade of a community's fire protection, from its fire department, water supply and alarm dispatch, that insurers use to rate property.

Public adjuster: A state-licensed professional hired by the policyholder, usually for a share of the recovery, to document, present and negotiate a property claim.

Punitive damages: Damages awarded to punish and deter malice, fraud or reckless conduct rather than to compensate; whether insurance may pay them depends on state law.

Q

QSEHRA: An employer-funded account for businesses under 50 full-time equivalent employees that reimburses workers for premiums and medical costs up to an annual cap.

R

Ransomware: Malicious software that locks or encrypts a victim's data or systems and demands payment for the key, often with a threat to publish stolen files.

Rate on line: The premium for a layer of reinsurance or excess coverage divided by that layer's limit, showing the price paid for each dollar of protection.

Reciprocal exchange: An insurer organized as an association of policyholders, called subscribers, who insure one another and are managed by an attorney-in-fact.

Reinsurance: Insurance an insurer buys from a reinsurer to transfer part of its risk, add capacity and protect its capital from large or accumulated losses.

Replacement cost: A valuation basis that pays the cost to repair or replace damaged property with like kind and quality, without deducting for depreciation.

Representations and warranties insurance: Insurance for a business sale that pays the buyer's loss if the seller's statements about the company in the purchase agreement prove untrue.

Reservation of rights: An insurer's written notice that it is handling a claim or defending a suit while keeping the right to deny coverage or recover costs later.

Retention: The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds.

Retroactive date: The date in a claims-made policy before which wrongful acts are not covered, even if the claim is made and reported while the policy is in force.

Retrocession: Reinsurance bought by a reinsurer to pass part of the risk it has assumed to other reinsurers or investors, usually to manage peak catastrophe exposure.

Retrospective rating: A rating plan that sets the final premium after the policy ends from the insured's actual losses in that period, within a minimum and a maximum.

Return-to-work program: An employer program that brings injured workers back to modified or transitional duty once a doctor clears them, to shorten claims and keep them connected.

Risk management: Identifying, assessing and treating threats to an organization by avoiding, reducing, transferring or retaining them; insurance is one tool among several.

Risk purchasing group: A group of businesses with similar liability exposures that buys liability insurance together under federal law, without forming its own insurer.

Risk retention group: A member-owned liability insurer formed under the federal Liability Risk Retention Act, licensed in one state but allowed to cover members in every state.

Risk-based capital: A regulatory formula for the minimum capital an insurer must hold against asset, underwriting and reserve risks, with escalating action as capital falls.

S

Schedule rating: An underwriter's credits or debits to manual premium for risk traits that manual rates miss, such as premises condition, safety program or management quality.

Section 125 plan: An employer cafeteria plan under IRC section 125 that lets employees pay for benefits such as health premiums with pre-tax pay instead of taxable cash.

Self-funded health plan: A group health plan where the employer pays employees' claims itself rather than paying an insurer premiums, usually backed by stop-loss insurance.

Self-insured retention (SIR): The amount of a loss the insured must pay itself, often including defense costs, before the insurer's liability policy begins to pay.

Sidecar: A special-purpose vehicle funded by outside investors that takes a share of an insurer's or reinsurer's business for a set term, usually collateralized.

Social engineering fraud: Fraud that tricks an employee into voluntarily sending money or data by impersonating a vendor, executive or client, rather than breaking into systems.

Social inflation: Growth in liability claim costs beyond general price inflation, driven by larger verdicts, litigation funding, advertising and shifting jury attitudes.

Soft market: The phase of the insurance cycle when capacity is plentiful and insurers compete on price, so premiums flatten or fall and terms loosen.

Special form (open perils): A property causes-of-loss form covering direct physical loss from any cause not specifically excluded or limited, rather than only the perils it lists.

Split-dollar arrangement: An agreement in which two parties, usually an employer and an executive or a company and its owner, divide a life insurance policy's premiums and benefits.

Spoilage coverage: Property coverage for perishable stock that spoils when temperature or humidity changes after equipment breakdown, refrigerant contamination or a power outage.

Stamping fee: A charge on a surplus lines policy that pays the state or its stamping office to review and record the placement, collected from the buyer with the premium.

Statement of values: A schedule listing each insured location with its building, contents and income values and construction details, used to rate and model a property program.

Statutory surplus: An insurer's admitted assets minus its liabilities under regulatory accounting rules, the capital cushion that stands behind policies beyond its loss reserves.

Stop gap coverage: Employers' liability insurance bought separately where a state fund provides workers' comp but does not insure lawsuits by injured employees or their families.

Stop-loss insurance: Insurance that reimburses an employer with a self-funded health plan when one person's claims, or the plan's total claims, pass a set dollar level.

Subcontractor warranty: A contractor liability policy condition requiring subcontractors to carry stated insurance and indemnity terms, with coverage cut back if they do not.

Sublimit: A lower cap on what a policy pays for one coverage, peril or item, set beneath the policy's overall limit.

Subrogation: An insurer's right, after paying a claim, to step into the policyholder's position and recover the loss from whoever caused it.

Surety bond: A three-party guarantee in which a surety promises an obligee that a principal will perform or pay, with the principal bound to repay the surety for any loss.

Surplus lines broker: A specially licensed broker who places coverage with non-admitted insurers after the admitted market has declined, and handles the required filings and taxes.

T

Tail coverage: An option that lets a claims-made policyholder report claims after the policy ends, for wrongful acts that happened while it was in force.

Temporary total disability: Workers' comp wage-loss benefit paid while an injured worker cannot work at all but is expected to recover, commonly about two-thirds of pre-injury pay.

Tenants' improvements and betterments: Fixtures, alterations and additions a tenant pays for but cannot legally remove, insured by the tenant as its use interest under its own property policy.

Terrorism Risk Insurance Act (TRIA): The 2002 federal law, run by Treasury, that backstops insurers' losses from certified terrorist attacks and requires them to offer terrorism coverage.

Third-party administrator (TPA): An outside firm hired to run claims and administration for a self-funded plan, captive or self-insured program without taking on the insurance risk.

Third-party coverage: Insurance that pays defense costs and damages when an outsider, such as a customer, patient or regulator, makes a claim against the policyholder.

Total cost of risk (TCOR): The full annual cost of carrying risk: insurance premiums, losses you retain, and loss-control and administrative spending, often shown as a share of revenue.

Total recordable incident rate (TRIR): A safety metric showing OSHA-recordable injuries and illnesses per 100 full-time workers in a year, calculated from case counts and hours worked.

Trade credit insurance: Insurance that reimburses a seller when a customer fails to pay a valid invoice because of insolvency or prolonged default.

Treaty reinsurance: A reinsurance contract that automatically covers a defined portfolio of an insurer's policies, instead of reinsuring one risk at a time.

U

Umbrella policy: A liability policy that adds limits above underlying general liability, auto and employers' liability policies and may cover some claims they do not.

Underwriter: The insurer's risk evaluator who decides whether to offer coverage, on what terms and at what price, within the authority the company grants.

Underwriting: How an insurer selects, prices and sets terms for risks, and the profit or loss it earns on that business before investment income.

USL&H coverage: Workers' comp coverage, added by endorsement, for maritime workers on or near navigable waters who fall under the federal Longshore Act.

Utility service interruption: Property endorsements covering loss when power, water, gas or communications to your premises are cut off by damage at an off-premises utility facility.

V

Vacancy clause: A commercial property condition that removes or reduces coverage for certain losses once a building has been vacant more than 60 consecutive days.

Valuable papers and records: Property coverage for the cost of replacing or restoring irreplaceable documents, plans and records, normally under a small limit.

W

Waiver of subrogation: An endorsement in which an insurer gives up its right to recover a paid claim from a named party, usually one the policyholder contracted with.

War exclusion: A clause removing losses caused by war, military action and similar hostilities, which cyber policies now stretch to attacks backed by a nation-state.

Workers' compensation: State-mandated no-fault insurance that pays medical care and part of lost wages for work-related injuries, in exchange for limits on employee lawsuits.

Wrap-up (OCIP/CCIP): A single insurance program, bought by a project owner or lead contractor, that covers the owner and all enrolled contractors on one construction project.

Written premium: The total premium on policies an insurer issues or renews in a period, counted when written, whatever share of the coverage period has passed.