Insurance terms

At the request of several customers over the years, we have prepared this Insurance Glossary of terms one might encounter when reading their insurance policies or communicating with Church Mutual.

The definitions in this glossary are not full legal definitions. They are intended to give lay people a quick idea of the meaning.

In many cases, there is a full legal definition of the terms in your insurance policy(ies). To know exactly what a term means, it is essential to read your policy contracts.

A

Account Manager — A field-based Church Mutual employee whose primary responsibility is service to customers within a given territory. Typically, an Account Manager serves customers within parts of several Regional Representatives' territories.

Account Number — The first seven digits of a Church Mutual account/policy number. Each customer has a unique one, and it does not change when the policy term is renewed. 0000000-00-000000. (The middle two digits denote the policy type, and the last six digits are the policy number. Policy numbers do change at renewal.)

Account Specialist — Account Specialists are fully licensed full-time Church Mutual employees who assist smaller churches with insurance renewals. They are based at our service center in Wisconsin.

Actual Cash Value — The amount it would cost to repair or replace an item with material of comparable kind and quality, less an allowance for deterioration or depreciation, including obsolescence.

Additional Insured — A person or organization not automatically included as an insured under an insurance policy but for whom insured status is arranged. A common "additional insured" is a mortgage holder. (Also see "Named Insured and "Insured.")

Adjuster (Independent) — A representative of the insurer who helps determine the value and extent of the loss once a claim has been submitted.

Aggregate Limit — Usually applies to liability insurance and indicates the limit the insured has under the insurance contract for the specific policy period, no matter how many separate accidents may occur.

Agreed Value — An agreement that the limit of insurance will be considered adequate to meet the coinsurance requirement. This agreement may be in the form of an endorsement or may be built into the policy language.

Annualization — The beginning of the second and third years of a three-year policy.

Arbitration — Process by which an insurance company and the insured agree to settle a claim dispute by accepting the decision of a third party.


B

Basic Cause of Loss Form — Specifies the covered causes of loss that apply to building and personal property, business income, extra expense, builders' risk and legal liability coverage forms.

Binder — An oral or written acknowledgment that insurance applied for is in force, whether or not the premium has been paid or the policy issued.

Blanket Insurance — Coverage for more than one kind of property (such as buildings and contents) at one or more locations or one type of property at more than one location.

Bodily Injury Coverage — Covers physical injuries to another person that the insured causes or that result from the insured's actions.

Broad Cause of Loss Form — Specifies the covered causes of loss and exclusions that apply to building and personal property, business income, extra expense, builders' risk and legal liability coverage forms. More causes are covered than under a basic form but fewer than under a special cause of loss form.

Builders' Risk — A special type of property insurance that covers damage to buildings while they are under construction. It protects insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure.

Business Auto Policy — A policy designed for a commercial automobile that covers vehicles owned/leased and operated by an institutional customer.

Business Income Insurance — Reimburses you for lost profits and continuing expenses during a time you must remain closed while the premises are being restored after physical damage.


C

Catastrophic Violence Response Coverage — Addresses violent incidents if they occur during an organized activity on a customer's premises and result in the serious bodily injury or death or hostage situation of two or more individuals, not counting the perpetrator(s).

Certificate of Insurance — A document providing evidence and serves as proof that certain types of insurance coverages, limits, and effective dates of policies have been purchased by the insured.

Claims-Made Policy — A coverage form for insurance that pays for claims presented to the insurer during the term of the policy or within a specific time period after its expiration.

Coinsurance — A policy provision by which the insured, in consideration of a reduced premium, agrees to carry an amount of insurance equal to a specified percentage of the total value of the property insured. This is not the same as coinsurance found in most health insurance policies.

Commercial Crime — Coverage that includes money and securities, stock and fixtures against theft, burglary and robbery, both on and off the premises, from both employees and outsiders.

Commercial Multi-Peril Policy — Package policy that can include property, crime, inland marine, hired and nonowned automobile, general liability and professional liability coverages.

Conditions — Provisions of an insurance policy that state the rights and requirements of the insured party and insurer.

Customer Service Representative — This title is most commonly associated with full-time Church Mutual employees at our award winning National Customer Service Center in Wisconsin. CSRs are fully licensed insurance professionals who are able to handle questions, certificates of insurance and changes in coverages and limits.


D

Declarations Page — Part of an insurance policy that states the name and address of the policyholder, property insured, its location and description, the policy period, premiums and supplemental information.

Deductible — A portion of a covered loss that is not paid by the insurer.

Definitions — Explanations of terms that have specific meanings in insurance coverage in a policy.

Depreciation — The decrease in value of property over a period of time as the result of age, wear and tear or economic obsolescence.

Directors, Officers and Trustees Liability Insurance — Errors and omissions coverage for an organization, its leaders, and governing bodies while acting within the scope of their duties.


E

Earthquake Insurance — Covers a building and its contents but includes a high percentage deductible on each. Earthquakes are not automatically covered by most property coverage policies.

Emergency Road Services Reimbursement — Optional business auto policy endorsement that covers towing services, labor at the place of disablement and travel delay assistance.

Employers Liability Insurance — This coverage is provided by Part 2 of a basic workers' compensation policy and pays on behalf of the insured (employer) all sums the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease sustained by an employee of the insured arising out of and in the course of this employment by the insured. These work-related injuries do not fall under the Workers' Compensation Statute. Sometimes referred to as "stop gap" coverage. Few claims fall under this portion of our workers' compensation policy.

Employment Practices Liability Insurance — Covers wrongful termination, discrimination or sexual harassment toward the insured's employees or former employees.

Endorsement — Written form attached to an insurance policy that amends the policy's coverage, terms or conditions.

Exclusions — Items or causes of loss not covered by the insurance contract.

Experience — History of losses.

Exposure — Measure of potential vulnerability to a loss, usually expressed in dollars.


F

Fidelity Bond — Covers policyholders for losses they incur as the result of fraudulent acts by specified individuals, including employees and volunteers.

Flood Insurance — Flood is excluded from almost all Church Mutual policies. It is available through the National Flood Insurance Program. (Church Mutual does offer a low-limit "limited flood" coverage, but it does not take the place of a true flood insurance policy through NFIP.)

Fraud — Lying or concealment by insureds to obtain payment of a claim that would otherwise not be paid.

Frequency — The number of times a loss occurs.


G

General Liability Insurance — Designed to protect you from liability arising from accidents on your premises or through your operations, products sold by you, operations completed by you and contractual liability and for which you are alleged to be negligent.


H

Hazard — Conditions that increase the likelihood of loss.

Hired Auto — An auto that is loaned to you or rented by you for use in the course of your business.

Hurricane Deductible — A percentage of dollar amount to limit the insurer's exposure to loss from a hurricane.


I

Identity Theft Insurance — Covers certain expenses incurred as the result of an identity theft.

Inflation Guard — A property coverage endorsement that increases the policy's limits of insurance during the policy term to keep pace with inflation. The increases are tied to a specific index, which can vary by company or policy.

Inland Marine Insurance — Covers articles in transit and also can be used to cover unique or especially expensive items. Common examples are rare artifacts and expensive artwork or musical instruments.

Institutional Income — Provides financial protection for the loss of income caused by direct physical loss or damage to property.

Insurance-to-Value — Insuring to an amount approximately the value of the insured property.

Insured (as a Noun) — Any person or entity covered by a policy. For example: employees, volunteers and others acting on behalf of the "named insured" typically are insureds under a commercial policy. (Also see "Named Insured" and "Additional Insured.")


L

Legal Defense for Allegations of Negligence — Insurance to cover the legal costs of defending lawsuits filed against your organization and/or covered officials, employees and volunteers who are acting on behalf of your organization. Except for certain professional liability coverages, Church Mutual typically provides legal defense coverage that is in addition to the policy's liability limit. (Not to be confused with this, Church Mutual also offers an optional legal defense coverage for legal activity that would not otherwise be covered by a liability policy — tenant/landlord disputes, for example.)

Liability Audit — Sent to the customer at the end of each policy term asking the number of day care children, students or campers that attended during that period. That is compared to the estimated numbers and the premium is then adjusted/billed up or down.

Liability Insurance — Pays on behalf of an insured for a loss arising out of legal liability to others.

Limit - The most an insurance company will pay for a covered loss.

Limitation — Typically, a restriction on the amount that may be paid for a certain cause of loss or type of property. For example, the amount of coverage for mold damage is typically less than the building limit. The amount that may be paid for jewelry is typically lower than the contents limit.

Loss Adjustment Expenses — The cost of investigating and settling claims, including the cost of defending a lawsuit in court.

Loss Control — Methods taken to reduce the frequency and/or severity of loss.

Loss Reserves — Insurance company's best estimates of what it will pay for claims. These are readjusted periodically.


M

Medical Payments Insurance — Coverage which reimburses others for medical or funeral expenses incurred as a result of bodily injury or death without regard to negligence.

Multi-Peril Policy — See "Commercial Multi-Peril Policy."

Mutual Insurance Company — The policyholders own the company. There are no stockholders or other investors.


N

Named Insured — For organizations such as religious institutions, the "named insured" is the institution itself. The named insured has certain privileges — such as making policy changes and receiving policy information — that other "insureds" may not have. (Also see "Additional Insured" and "Insured.")

Negligence — Failure to use a degree of care considered reasonable under the circumstances.

Nonowned Auto — An auto owned by and driven by a volunteer or employee on behalf of your organization.

Notice of Loss — A written notice required from the insured by the insurance company immediately after an accident or loss.


O

Occurrence — An accident including continuous or repeated exposure to substantially the same general harmful conditions.

Occurrence Policy — Pays claims arising out of covered incidents that occur during the policy term, even if they are filed many years later.

Ordinance or Law Coverage — For a covered cause of loss, this pays for the extra expense of rebuilding to comply with ordinance or laws (typically building codes) that did not exist when the building was constructed. Can also include cost of demolishing an undamaged portion of a building.


P

Package Policy — A single insurance policy that can combine several coverages. Also called a multi-peril policy.

Personal Injury — An offense to a person that causes harm other than bodily injury, such as libel, slander, false arrest, detention or imprisonment, copyright infringement, wrongful eviction, malicious prosecution or invasion of privacy.

Peril — A cause of loss.

Policy — The written insurance contract. An insurance policy is assembled with a combination of various standard forms, including a declarations page, coverage form and endorsements. A cause of loss form may also be included. Together, these forms delineate the coverage term, the insurance policy limits, the grant of coverage, exclusions, other limitations of coverage and the duties and responsibilities of the insured in the event of a loss.

Policy Number — The last six digits of your Church Mutual account/policy number. 0000000-00-000000. This changes each time the policy term is renewed.

Policyholder — The organization (or person for a homeowners policy) that is the first named insured on the insurance policy.

Prefix/Policy Type — The two numbers between the account number and policy number that are used by Church Mutual to denote the type of coverage the customer carries. 0000000-00-000000. Most common are multi-peril (02 and 21), workers' compensation (07), business auto (09) and umbrella (81).

Premises — The particular location of a covered property designated in an insurance policy.

Premium — The amount of money an insurer charges to provide the coverage described in the policy.

Premium Audit — An audit of the exposure basis for an insurance policy after the end of the policy period to determine the actual exposure for the purpose of making a final calculation of the premium.

Professional Liability Insurance — Various errors and omissions coverages, such as employment practices liability, employee benefits liability, directors and officers liability and counseling liability.

Property/Casualty Insurance — A segment of the insurance industry that includes auto, homeowners and commercial insurance.


R

Rate — The cost of a unit of insurance, usually per $1,000. Based on historical loss experience for similar risks and often regulated by state insurance offices.

Regional Representative — Regional Representatives are full-time Church Mutual employees charged with sales and service responsibilities within an assigned territory.

Reinstatement — Returning a cancelled policy to active status for the original policy period.

Reinsurance — Insurance purchased by an insurance company for its own protection generally against large and/or catastrophe losses.

Renewal — The re-establishment of an existing policy for a new period of time.

Replacement Cost — The dollar amount needed to replace damaged property without deducting for depreciation but usually capped at the policy limit.

Risk Management — Analyzing all loss exposures you may face and determining how to address them to minimize the financial impact of risk they impose.


S

Schedule — A list of individual items or groups of items covered under one policy. For example, a schedule of buildings, schedule of vehicles or schedule of items covered by an inland marine form.

Severity — The amount of damage that is inflicted by a loss.

Sexual Harassment — Unwelcome sexual advances, requests for sexual favors or other verbal or physical conduct of a sexual nature to an employee against his or her wishes.

Sexual Misconduct — Includes a range of behaviors used to obtain sexual contact against a person's will. In Church Mutual's nomenclature, an alleged offense is "sexual misconduct" when the alleged victim is neither an employee nor a minor.

Sexual Molestation — Essentially the same as sexual misconduct, but in Church Mutual's nomenclature, an alleged offense is "sexual molestation" when the alleged victim is a minor.

Special Cause of Loss Form — Church Mutual's most comprehensive property form in a multi-peril policy. The special cause of loss form lists loss causes that are not covered. Historically, this form has been called an "all risk" form, but it never did cover "all" risks.

Subrogation — The right of an insurer after payment of a loss to take over the rights of an insured to pursue recovery against a legally liable third party.

Systems and Equipment Breakdown Coverage — Covers certain damage caused by the malfunction of boilers and other equipment, such as air conditioners, heating, electrical and computer systems.


T

Tort — A private wrong committed against another, which gives rise to a legal liability.

Total Loss — A loss of sufficient size that there is no value left — such as a building that is destroyed by wind or fire.


U

Umbrella Policy — Provides a limit over specific underlying policies when their limits are exhausted by payment, and it provides protection against some claims not covered by the underlying policy, subject to a self-insured retention.

Underinsured Motorists Coverage — Coverage for bodily injury and, in some states, property damage incurred by an insured when an accident is caused by a motorist who is not sufficiently insured. Coverage applies when the insured's damages are more than the at-fault party's available limits.

Underwriting — Selecting risks for insurance and classifying them according to degrees of insurability, so the appropriate rates will be assigned for insurance coverage provided to them.

Uninsured Motorists Coverage — Coverage for bodily injury and, in some states, property damage incurred by an insured when an accident is caused by a motorist who is not insured.


W

Workers' Compensation Insurance — An insurance policy that provides coverage for an employer's exposure arising out of injuries sustained by employees. Part 1 of the policy covers the employer's statutory liabilities under state workers' compensation laws. Benefits, which are set by each state, typically including costs of medical care, rehabilitation and lost wages.

Workers' Compensation Laws — The system by which no-fault statutory benefits prescribed in state law are provided by an employer to an employee due to a job-related injury, including death, resulting from an accident or occupational disease.

Workers' Compensation Payroll Audit — A workers' compensation policy is initially written for an estimated premium using estimated payrolls for employees. Each year, the payroll is audited to compare the actual payroll for the previous period against the estimated payroll used in the initial premium calculation. Adjustments in premium are then made and billed for or refunded.