The Property and Casualty (P&C) insurance industry is a vast segment of the insurance industry and there are numerous terms used within it. Be careful, as other segments of the insurance and finance industry use the same or similar terms, but their definitions can differ! The following list was made to explain common terminology used in Personal and Commercial Property and Casualty insurance:
Property Insurance: It covers any asset that could suffer a loss, primarily tangible items. Examples: houses, vehicles, office buildings, jewelry, computers, etc.
Casualty Insurance: This is insurance for any situation where you might incur liability for harming someone, their property, or their rights. It is a cover-all term for liability insurance coverages, dealing with accidents or negligence that cause damages to others.
Insured: The person, people, or legal entity that has the benefit of an insurance policy.
Insurer: Also known as an 'Insurance Carrier' or just simply a 'Carrier'. This is the legal entity that is providing the insurance policy to you.
Deductible: The Deductible is the dollar amount the insured must pay after a loss. It's a method of sharing the loss amount with the insured. For example, with a Deductible, a loss occurs and the insurer pays for the loss, then bills the insured for the deductible amount.
Retention: A Retention is similar to a Deductible, but is different because the insured must pay the Retention amount before the insurer will pay.
Exposure: This is used both as a noun and a verb, as in an exposure to loss or simply an exposure itself. Example: The Exposures of an amusement park are harder to cover than a bakery’s.
Peril: A cause of loss. Examples: fire, wind, hail, collapse.
Risk: The possibility of a loss. Similar to 'Exposure'. Example: Contractors have more risk than an ice cream parlor. This can also be used as a noun, referring to insureds as a 'Risk'.
Hazard: Something that increases risk: something that increases the chances of a loss. Example: Wet floors in a grocery store, cracked pavement in a parking lot.
Inception Date: Also known as the 'Effective Date'. The exact day and time when your insurance policy begins to provide coverage.
Expiration Date: Also known as an 'Ex-Date'. The exact day and time when your policy stops providing coverage.
Coverage: Insurance protection for a peril or perils. For example, Commercial Property insurance provides coverage for the peril of fire.
Package Policy: A Package policy combines two or more coverages into a single policy, where you pay one premium and the coverages all have the same inception date. For example, a Homeowners policy is a package policy as it has property and personal liability coverages included in it.
Personal Lines: These are the coverages that deal with the risk of individuals. These products are often more simple than Commercial Lines and they're tailored to meet the needs of the average citizen.
Commercial Lines: These are the coverages that deal with the risk of businesses and organizations. The products in Commercial Lines vary greatly in complexity and coverage provided, and the total number of Commercial Lines products available is numerous.
Standard Insurer: Also known as an 'Admitted Insurer'. This is an insurance company that has insurance products that have been reviewed by the State Department of Insurance and also participates in the State Guarantee fund to protect consumers should their insurer go bankrupt. The products are regulated by the state, and so are the rates that they use.
Surplus Lines Insurer: Also known as a 'Non-Admitted Insurer'. This is an insurance company that has products for special exposures or extremely hazardous operations, such as a firm with a bad claim history. These companies do not file their products with the State Department of Insurance and they can use subjective rating as they see fit. The insureds of Surplus Lines Insurers do not benefit from the State Guarantee fund, meaning that they will not have access to the fund in the event their insurer goes bankrupt. The products Surplus Lines Insurers provide are often not standardized and the premiums charged are likely to be higher than a similar policy written with a Standard Insurer.
Assigned Risk Worker’s Compensation: Also known as ‘The Pool’. Assigned Risk is for companies that have a bad Workers’ Comp claim history and/or companies that are in a ultra-hazardous industry. The Assigned Risk Insurer is contractually bound by a state to accept all applicants. Being similar to Surplus Lines, the premium you pay with an Assigned Risk Insurer will be far greater than a Standard Insurer.