Actual Cash Value

The actual or current value at the time of the loss. This may be the cost of replacing the article with a similar model and in similar condition. It may however involve the price of the article plus any appreciation since its purchase and less depreciation.

All Risk Policy

A policy which does not state coverage on specific perils but covers all perils subject to certain limitations as set out in the policy. It's the reverse of the Named Perils policy.

Betterment

Where the results of repairs or replacement due to a loss results in the insured receiving something better than he had before the loss. The difference is known as "betterment." In most instances, this difference is discussed before the repairs or replacement is made and the insured has agreed to an appropriate figure as to his contribution for this "betterment." This is also referred to as "new for old."

Claim

A claim is the exercising of the right of an insured person to be reimbursed by his or her insurance company for certain financial losses suffered.

Claimant

One who makes a claim. It is commonly used in identifying a third party who is making a claim against the insured. Technically, however, it also applies to an insured that is making a claim against the insurance company.

Comprehensive Coverage

Comprehensive Form policies provide all risks coverage on both the building and the contents.

Deductible

The deductible is the portion of the insured loss that you pay; the amount appears on your policy. It's generally a cost-effective way for policyholders to "self-insure."

Depreciation

The decline in value of property from any cause - such as use, wear-and-tear, obsolescence, etc. Depreciation is taken into account when arriving at the proper amount to be insured, or the amount of loss to be paid, unless the insurance is on a valued or replacement cost basis.

Earned Premium

The premium for the amount of insurance used. The amount of premium which would pay for insurance from the inception date of the policy until the particular date at which it is desired to calculate the earned premium. It is the expired portion of a premium.

Effective Date

The date of inception of an insurance policy or bond. The date at which the protection becomes effective. All policies become effective at 12:01am on the effective date.

Expiration Date

The date of termination of a policy. At that date, it automatically expires. The expiration takes place at 12:01am on the noted expiration date.

Flat Cancellation

The cancellation of a policy in such a manner that the termination of a policy coincides exactly with its inception. In certain special circumstances, a policy can be "cancelled flat" and the insured is entitled to receive a full refund of the premiums he/she has paid and the policy is in effect, cancelled from the beginning.

Fraud

An act of willful deception and dishonesty carried out with a view to securing some advantage, profit, etc. to which one is not entitled, at the expense of another. Fraud increases everyone's insurance costs. To help keep down costs for honest policyholders, insurers prosecute those who make fraudulent claims.

Legal liability

Means liability at law for the consequences of some negligent act as opposed to liability for breach of contract.

Loss of Use

Insurance protection against loss due to the inability to use a property because of its damage or destruction.

Market Value

The value of assets (e.g. stocks, bonds, debentures, real estate, etc.) based on a current market valuation.

Misrepresentation

The assertion of a material fact, which the insured knowingly perverts. The failure of the applicant for insurance to make a fair disclosure of all pertinent and attendant circumstances, might void the policy.

Mortgagee

The person who has loaned his money to another and taken the security of property in exchange.

Mortgagor

A person who mortgages property by borrowing money and using it as security.

Named Insured

The person in whose name the policy is issued, the policyholder, is often referred to as a "named insured." Technically, he or she would be the first party to the contract, the

Named Perils Policies

Policies that specifically state the perils against which protection is given and no others. This is distinct from "All Risk Policy," which covers all risks of all perils with the exception of certain specific perils outlined in the policy.

Negligence

The omission to do something which a reasonable and prudent person would in similar circumstances have done, or doing something which a reasonable person in such circumstances wouldn't do.

"No-fault"

Insurance that pays for some or all of the insured person's loss, no matter who caused it, is often described as "no-fault" coverage. Despite its name, it really does matter who caused the damage, because if you're at fault, your insurance premiums may increase.

Premium

An insurance premium is the money the policyholder pays to the insurer for financial protection against specific risks for a specific time span. Unlike the premiums for many forms of life insurance, property and casualty insurance premiums are not intended to produce a reward other than financial peace of mind.

Pro-rata cancellation

An arrangement for the termination of an insurance contract usually by the insurance company in which the insured is refunded the exact proportion of the premium which has not yet been used.

Replacement Value

The cash value representing what it would cost to replace the particular article that is the subject of insurance.

Subrogation

The substitution of one person or company, for another so that the rights and duties of the original person or company becomes operable by the other.

Third party

The first person referred to outside the particular transaction involved. In an Insurance Liability policy the third party is a person who may be injured or whose property may be damaged other than the insured or insurance company. There may be many third parties in one case.