Glossary of Insurance Terms

The Insurance Industry uses many specific terms. This can make navigating the insurance world confusing. Here's a list of terms and definitions that can help you better understand your ministry's insurance options.


actual cash value
cost of repairing or replacing damaged property with materials of similar kind and quality, minus depreciation

aggregate limit
the most the insurance company will pay for all covered events during a specified time period

athletic activity
participation in sporting or recreational activities such as softball leagues or roller skating


basic perils
aircraft damage, explosion, sonic boom, fire, smoke damage, hail, volcanic action, lightning, windstorm, vehicle damage, riot or civil commotion, vandalism, sinkhole collapse

compensation for loss and other services provided by the insurance company under terms of the contract insurance that covers multiple buildings or people at one or multiple locations on a single policy

broad perils
all the basic perils, plus collapse, falling objects, sprinkler leakage, water damage, limited glass breakage and weight of ice, sleet or snow

broadened replacement cost
cost of replacing property is limited to 125 percent of the scheduled amount of each building on the policy

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claims-made coverage
policy that only covers claims made during the policy period regarding an event that occurred during the policy period

coinsurance clause
a property insurance provision that limits the recovery of losses on underinsured property

combined basis
a single insurance limit for all types of property at multiple locations; also referred to as blanket basis

provisions of an insurance policy that state the rights and requirements of the insured party and the insurer

counseling act
giving advice to another person for the purpose of benefiting the person’s mental, emotional, or spiritual condition

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day care activity
the teaching, supervision, and care of day care participants in exchange for payment of a fee

declarations pages
pages that give the specifics of an insurance policy, including the name of the insurance company, name of the insured party, time covered by the policy and the policy limits

portion of a loss covered by an insurance policy that must be paid by the insured party before the insurance company pays

defense reimbursement coverage
provides reimbursement of specified legal expense not otherwise covered by insurance

explanations of terms that have specific meanings with regard to insurance coverage in a policy

direct loss
a loss that results directly from a particular event, such as fire damage to an apartment

discriminatory act
a violation of federal or state laws that protect the rights of individuals based on the person’s race, religion, gender, sexual orientation, nationality, or disability, or conduct otherwise interpreted as discriminatory in nature

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emotional injury
mental injury, suffering, or distress that is not caused by physical injury

employee benefit program
a benefit program maintained by an employer for the welfare of employees and their dependents, such as group medical, life, or disability insurance, and pension or retirement plans

employment practices liability coverage
provides protection for covered claims arising out of the hiring process, employment-related discipline, promotion and firing, and other claims arising out of the employment relationship

an addition to an insurance policy that changes the original provisions

excess coverage
coverage for which limits apply after primary insurance has been paid under another policy

excess (umbrella) liability
coverage issued to provide limits in excess of an existing liability policy

provision of an insurance policy that describes situations or property not covered

state of being subject to the possibility of loss

provisions in an insurance policy that extend coverage beyond the basic coverage

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foreign contingent auto liability
insurance coverage that protects an organization and its foreign travelers against lawsuits arising from negligent operation of an owned, rented, or borrowed vehicle operated in a foreign country

foreign liability coverage
insurance coverage that protects an organization and its foreign travelers against liability-based lawsuits brought in another country

full-time clergy
ordained or licensed pastor or minister working at least 36 hours per week

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a condition that increases the probability of loss, such as poor lighting or slippery floors

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indirect loss
consequential loss resulting from direct damage, for example: loss of rental income when a tenant is displaced due to a fire

inflation guard endorsement
a provision that automatically adjusts an insured party’s property values each quarter based on a specific percentage

transfer of a risk of financial loss from the insured party to the insurance company

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a person serving as an administrator, director, officer, or trustee of an organization

an obligation to pay for injury or damage caused by negligence or intentional wrongdoing

the maximum amount an insurance company agrees to pay to cover a loss

coverage restrictions in a policy, such as how much the insurer will pay in the event of a loss

loss exposures
conditions or situations that present the possibility of a loss

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failure to use a degree of care considered reasonable under a specific set of circumstances

no-fault auto coverage
a type of insurance in which damages are paid by each person’s insurer, regardless of who was at fault

non-owned vehicle
vehicle used in connection with an insured party’s business that is not owned, leased, hired, rented or borrowed by the insured party

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occurrence coverage
policy that covers events that occurred during the policy period regardless of when the claim is filed

ordinance or law coverage
special coverage available by endorsement that insures the loss caused by complying with certain laws or local ordinances that require buildings to be rebuilt instead of repaired if they are damaged beyond a specified extent

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a cause of loss

per occurrence limit
the most an insurer will pay for losses from a single event, regardless of the number of people injured or the number of parties claiming property damage

personal injury
a defined offense to a person that produces harm other than bodily injury, such as libel or slander, false arrest, wrongful entry, copyright infringement, or malicious prosecution

policy period
the term or duration of an insurance policy

policy territory
the geographical area in which damage or injury must occur for coverage to apply

the price of the coverage provided in an insurance policy for a specified time period

premium audit
inspection of the records of an insured party and calculation of the final premium based on the actual exposures faced during the policy period

primary coverage
policy that responds initially to an insured loss

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recreational vehicle
a self-propelled vehicle other than an automobile that is designed or used for leisure activities

religious activity
an act or expression undertaken in accordance with, and in furtherance of, the spiritual or religious beliefs of an organization

religious communication
an oral or written communication containing any religious or spiritual content conveyed to three or more persons

bringing an injured or ill worker back to his or her home country from abroad

replacement cost
cost of replacing property with property of similar kind and quality without deducting for depreciation

resident clergy
a pastor or minister employed by the organization and listed as a resident clergy on the policy declarations page

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scheduled basis
separate insurance limits for individual buildings at different locations and limits for personal property within each building

special perils option
coverage of direct physical loss to insured property up to the insured limit, unless the cause of loss is specifically excluded in the policy

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tail coverage
extension of a reporting period beyond the expiration date of a claims-made insurance policy

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umbrella coverage
coverage issued to extend the limits and coverage of the primary liability policies

underinsured motorists coverage
insurance that provides coverage for injury and damage caused by a motorist who has insufficient insurance

uninsured motorists coverage
insurance that provides coverage for injury and damage caused by a motorist who doesn’t have insurance

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wrongful employment act
action directed against an employee or job applicant such as discrimination, sexual harassment, or breach of employment contract

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