Insurance

Insurance Terms

Admitted Company: An insurer of another state or country that is licensed under the law of a state to do business in that state.

All Risk Insurance: Coverage for all perils except those specifically excluded in the policy.

Annual Statement: The annual report of an insurer as of each December 31, submitted to the insurance department in March of the subsequent year. showing assets and liabilities, receipts and disbursements and other information.

Audit: A verification or determination of actual exposures, for the purpose of computing actual premiums. An interim audit is an audit that occurs prior to the termination of the policy period. A final audit would occur after the end of the policy period.

Automobile Insurance: The insurance of automobiles involves three basic types of coverage: 1) liability-coverage for losses caused by injuries to persons and legal liability imposed on the insured for each injury or for damage to property of other. 2) physical damage-coverage for losses caused by damage to or loss of insured automobile. 3) no-fault (pip) -first party coverage for losses caused by injuries to persons without regard to fault.

Bobtailing: The operation of a tractor without the trailer.

Calendar Year Statistics: Experience developed on premium and loss transactions occurring during the twelve calendar month beginning January 1 (July 1 for fiscal calendar year), irrespective of the effective dates of the policies on which these transactions took place-shows a running record of insurer loss and premium transactions during a twelve month period. Incurred losses are equal to payments during the calendar year plus reserves outstanding at the end of the calendar year minus reserves outstanding at the end of the prior year.

Cancellation: The discontinuation of an insurance policy before its normal expiration date. Cancellation by the company requires written notice to the policyholder. The number of days notice required for an effective cancellation is governed by policy provisions or state law.

Cede: When a company reinsures its liability with another insurance company, it "cedes" business.

Claims Frequency: Number of claims per unit of exposure. It is obtained by dividing the number of claims by the exposures.

Claims Severity: The loss amount per claim during specified period of time.

Claims Reserve: An estimated amount of loss payment.

Co-insurance: A provision/condition under which an insured, in consideration of a reduced premium, promises to maintain a certain percentage of insurance to the value of the insured property. The co-insurance clause attached to the policy specifies the percentage and has no effect on the claim payment as long as the insured keeps his promise. If the insured carriers less than the stipulated percentage of insurance to values, then the loss payment is limited to the same ratio which his insurance bears to the amount required. For example, the motor truck cargo policy requires 100% co-insurance. If the insured had a $50,000. limit but hauled cargo valued at $100,000. the insured failed to maintain the 100% coinsurance. He now has a loss $25,000. The payment would be $50,000/$100,000 or 1/2 x 25,000.= $12,500 payment.

Common Carrier: A trucker who offers its services of hauling commodities, for a fee to the general public.

Comparative Negligence: Law which determines damages paid based upon the amount of negligence attributable to each party involved. The party that is more than 50% negligent pay the other party for damages but only up to that amount of determined negligence.

Composite Rate: A special "single" rate based upon a measure of exposure which reasonably reflects the variations in the insurable hazards covered for a particular insured. Basis of exposure to which the composite rate is applied include, but are not limited to, payroll, sales, receipts and contract costs.

Consent to Rate: A designation given to risks that are individually rated by a company and for which the company must secure Insurance Department approval.

Contingent Liability: The liability imposed upon an individual, corporation or partnership because of accidents caused by persons (other than employees) for whose acts the first party may be responsible.

Contract Carrier: A carrier hauling only under specific contract to one or a few shippers and not open to be "hired" by the general public.

Contractual Liability Insurance: Insurance for liability over and above the amount imposed by law which a person assumes under the terms of a contract.

Contributory Negligence: The act or omission to act on the part of one person which, when taken with the act of omission of another person, can be considered a contributing cause of the accident or injury.

Deadheading: The operation of a tractor/trailer unit without a load and not under dispatch.

Financial Responsibility Law: A law under which a person involved in an automobile accident may be required to furnish security up to certain minimum dollar limits. Each state has some form of such a law and the limits may vary.

Freight Broker: A person or organization who makes arrangements between shippers and motor carriers for the transportation of cargo.

Gross Receipts: The premium basis usually used on fleet policies which reflects the insured's exposures for hauling commodities.

Hired Car: Any automobile whose exclusive use and control has been temporarily given to another for a consideration/fee. For truckers this usually represents trip-leasors used by a trucking company to haul under that trucking company's operating authority.

Hold Harmless Agreement: A contractual arrangement whereby one party assumes the liability of a situation, thereby relieving the other party of the liability or responsibility of the situation.

Insurable Interest: Relationship or condition in that loss or destruction of life or property would cause a financial loss. In the case of loss or destruction of property, such interest must exist at the time of loss. Pertains to physical damage insurance written on the commercial auto policy or various additional insured requests for the liability coverage.

Insuring Agreement: That portion of the insurance policy which describes the coverage afforded by the policy and which makes reference to all promises, provisions and conditions agreed upon by the contracting parties. (Insured and Insurance Company).

Legal Liability: Liability imposed by law, as opposed to liability arising from a contract.

License And Permit Bonds: Bond required by various municipalities or public authorities to indemnity them against loss in the event of violation of regulation or ordinances under which the permit is required.

Loss Ratio: A percentage arrived at by dividing the amount of the losses by the amount of the earned premium.

Negligence: An act or omission contrary to the conduct of a reasonable person in the same circumstances. This constitutes ordinary negligence. Gross negligence is far above the omission of care of an ordinary reasonable person, almost criminal. Will and wanton negligence is reckless indifference to the consequence of one's act or omission or a violation of statutory law.

Non-Ownership Automobile Insurance: Protection of the insured against liability claims caused by the insured's employees in conducting the insured's business while using autos not owned or hired by the insured. (Employee's own automobile). Coverage is usually excess over the insurance applicable to the employee's automobile.

Occurrence: An individual accident occurring at one identifiable time and place. Use interchangeably with the term "accident".

Omnibus Clause: An automobile policy provision which covers persons driving the named insured's auto with the named insured's permission.

Owner Operator: An individual or organization who owns truck equipment and operates that equipment either individually or with employees.

Policy Limits: The maximum amount of loss dollars that a particular policy will cover as designated in the policy limits.

Primary: A term used to refer to the policy which will respond first in the event of a loss covered by two or more policies. In truckers liability insurance this term refers to the liability coverage provided to the motor carrier under whom the transported.

Punitive Damages: Damages awarded separately and in addition to compensatory damages, usually on account of malicious or misconduct.

Subrogation: Upon payment of a loss to the insured, the insurance company is entitled to the insured's legal and equitable rights against third parties. These rights are only those related to the loss and the company is only entitled to the extent of the loss payment.

Triplease: A written contract between 2 motor carriers for which one will haul the load on behalf of the other carrier under that carrier's operating authority. Usually these contracts for a period of less than 30 days or on a per trip basis.

TORT: A wrong committed against another from which satisfaction is available in a civil court. This forms the basis of insurance liability concepts.