Insurance Terms Glossary

Insurance language is complicated. To help guide you through your claim, our public adjusters have compiled a handy list of definitions for terms you may run across in the process.


  • Accident
    An unexpected event, often with harmful consequences. (See also occurrence.)
  • Accident - Boiler and Machinery
    Various definitions as spelled out in the four object definition forms of the Boiler & Machinery Policy.
  • Accounts Receivables
    The records of money owed to an individual or organization which, if lost, stolen, or destroyed, could prevent their collection; The value of these records can be insured under Inland Marine Accounts Receivable insurance.
  • Actual Cash Value
    The value of property immediately before loss taking into account its "used" condition, wear & tear, etc.; usually considered the "depreciated value, although "market value" and obsolescence may sometimes also be taken into account.
  • Actual Loss Sustained Business Interruption Insurance
    Form of coverage used in Boiler & Machinery Insurance that pays the amount of business income loss actually incurred following an insurance property loss. (In contrast to "Valued" coverage.)
  • ACV
    The commonly used abbreviation for Actual Cash Value.
  • Agreed Amount Clause
    Former name of Agreed Value Option. (see below for definition of Agreed Value Option).
  • Agreed Value Option
    An optional clause for Property & Business Income policies that waives the Coinsurance Clause on a year by year basis based on the filling, and accepting by the insurer, of a statement of actual values on which the amount of insurance for the coming year is based; Failing to file a new statement within the required time results in reapplication of the Coinsurance clause until a new statement is filed and approved. (See Coinsurance.)
  • All-Risks Insurance
    Former name of coverage that applies against all risks of loss not specifically excluded; The term "All-Risks" is no longer used as it seems to suggest (in the minds of insurers) that more coverage is being given than is intended.
  • Assessment Liability
    Liability of an insured condominium owner, cooperative apartment tenant, or others for the cost of assessments laid on the individual owner or tenant to pay for costs or improvements for the common good; Insurance can be purchased to cover this exposure.
  • Average Clause
    Another term for a Coinsurance Clause (See Coinsurance.)


  • Bare Walls Ownership
    A type of Condominium ownership in which the Unit Owner individually owns the inside of the unit up to the inside of the bare outside walls, floor, and roof or ceiling, and the unit owners in common own the remainder of the buildings and grounds. This is one of several possible methods of Condominium Ownership.
  • Blanket Insurance
    Insurance that covers more than one subject of insurance or at more than one location, or both.
  • Boiler and Machinery Insurance
    Insurance that covers boilers and/or machinery against explosion or breakdown losses normally excluded from property insurance policies.
  • Boiler and Machinery Time Element Insurance
    Insurance that covers loss of profits or earnings when an operation is shut down totally or partially by an accident covered by Boiler & Machinery Insurance, or extra expense incurred following accident to maintain or hasten resumption of operations.
  • Building Codes
    Laws passed by municipalities, counties, states, or now even Federal jurisdictions, that regulate how reconstruction must be accomplished after the property is damaged or destroyed, and may even require demolition, and sometimes even prohibit rebuilding if the loss is over a certain degree.
  • Building Ordinance Exclusion
    (Also see Ordinance or Law exclusion.) A standard exclusion found in most property, business income, and boiler & machinery insurance policies that does not cover the added cost of complying with building or zoning laws after an insured loss.
  • Building Ordinance Insurance
    (Also see Ordinance or Law Insurance.) Coverage setting aside the Ordinance or Law exclusion and offering one or more of three coverages for the possible added ordinance or law compliance: 1) demolition costs; 2) loss of value of the undamaged portion of a damaged building; and 3)increased cost of reconstruction to comply with current law.
  • Burglary
    Theft by breaking and entering a building or vehicle.
  • Business Defined
    For Boiler & Machinery Valued Business Interuption, 4 definitions apply: 1) Production, the production of finished goods ready for packing, shipping or sale; 2) Sales, gross sales at the location; 3) Rents, rents collectible at the location, or 4) Income, gross income at the location.
  • Business Income from Dependent Properties - Formerly Contingent Business Interruption Coverage
    A form of business income insurance covering an insured against loss of income and continuing a major supplier, a major customer, or a major location where the insured is a satellite and will lose business if the major shuts down, or (for sales representatives) a manufacturing supplier.
  • Business Income Insurable Value
    Generally Gross Sales less most (but not all) Items of Cost of Goods Sold. (Also figured as Profit plus Continuing Expenses) It determines the amount of business income Insurance that must be carried to satify the Coinsurance (Contribution) Clause of the Business Income policy.
  • Business Income Insurance
    Insurance covering loss of business income and continuing expenses following an insured loss.
  • Business Interruption Coverage
    A former term for business income insurance, still in use in boiler & machinery insurance.


  • Care - Custody - Control
    An exclusion found in most general liability policies, giving no coverage for loss or damage to property held in the care, custody, or control of the insured.
  • Civil Authority Clause
    A clause found in business income policies extending the coverage to loss when adjacent or nearby premises are closed down by order of civil authority, prohibiting occupancy of the insured's premises; usually applies for up to two, or after a waiting period, three weeks.
  • Claims Adjustment Expense
    The cost incurred by the insured or by claim professionals hired by the insured to figure out the more difficult aspects of a claim; many policies do not cover this cost, but special forms and endorsement are available to cover it.
  • Coinsurance Clause
    A clause found in most commercial property and business income insurance policies that requires the insured to carry a specified percentage of insurance to the value being insured, and failing that, recovery of loss is reduced in proportion to the deficiency. Also sometimes known as Average or Contribution Clause
  • Combined Business Income - Business Interuption - and Extra Expense Insurance
    Insurance that includes coverage for both loss of earnings following insured property loss and the extra expense to stay in business or expedite more rapid return to business, beyond the amount that would reduce the loss of earnings covered by Business Income Insurance (found with both Property and Boiler & Machinery forms).
  • Concurrent Causation
    A concept that began in California in which courts found that even though a peril, such as earthquake or flood, was clearly excluded from coverage, if another peril, e.g., faulty design of a dam, not excluded, could be found, coverage could be found to apply. To stop this, insurers put "concurrent causation" exclusions in their policies which not only solved the concurrent causation problem but in some cases even went so far as to take away coverage formerly offered under "all risk" policies. Meanwhile, California courts have rescinded the concurrent causation doctrine, but the insurers have not, up this point seen fit to remove the exclusions.
  • Concurrent Causation Exclusions
    Exclusions added to various property insurance policies intended to eliminate coverage when a loss occurs that is not covered because of a basic exclusion. They are (in brief): weather conditions; acts or decisions, including failure to act or decide, of any person, group, organization, or governmental body; and faulty, inadequate or defective planning, zoning, development, surveying, sitting, design specifications, etc., materials used, or maintenance. These exclusions do not apply to any loss covered (or not specifically excluded) under the policy, but only to excluded losses.
  • Conditional Suspension of Coinsurance
    Endorsement used with Boiler & Machinery Business Interruption Actual Loss Sustained Insurance to waive the coinsurance clause on a year-by-year basis. (Similar to Agreed Value Option on Property Insurance.)
  • Condominium
    A concept of apartment, office, or retail ownership which took hold in the USA in the 1960s, in which individual "unit owners" own the space they occupy and the "unit owners in common" collectively own the remainder of the buildings and grounds. All the unit owners are required to belong to the condominium association and share in the condominium expenses and can be assessed to meet extraordinary condominium expenses.
  • Condominium Bylaws
    The rules set up by the condominium managers that govern how the condominium operates.
  • Condominium Declarations
    The legal document set forth when a condominium is established (equivalent to the title for real property) outlining the exact duties, rights, and privileges, of the unit owners, unit owners in common, and the condominium association and board of directors or managers.
  • Consequential Damage
    Loss other than direct property damage or business income/business interruption/extra expense, usually involving losses such as off-premises utilities, spoilage from refrigeration loss, etc.
  • Contingent Business
    Interruption Insurance—A form of business income insurance covering an insured against loss of income and continuing expenses for shutdown of a dependant property, a major supplier, a major customer, or a major location where the insured is a satellite and will lose business if the major shuts down.
  • Contingent Business Interruption Insurance
    See Business Income from Dependent Properties Coverage.
  • Contingent Liability for
    Operation of Building Laws—Former name for one of the three kinds of loss resulting from operation of building or zoning laws; now simply Coverage A applying to loss of value of the undamaged portion of a building when it must be demolished or substantially modified because of application of an ordinance or law.
  • Continuing Expenses
    Expenses which must be continued after a suspension of operations, even though no income is being earned to cover them.
  • Contribution Clause
    Essentially the same as a coinsurance clause (Also see Average Clause.)
  • Cooperative Apartments
    Rental apartments, in which the tenant holds a lifetime lease which can be sold to others at any time, usually with the approval of the cooperative management
  • Cost of Goods Sold
    When used by accountants, it means all costs entering into the price of the goods except for profit; when used in business income insurance, it is a deduction from the amount of insurance needed, but does not include such items as labor and overhead costs. This difference should be in mind when developing insurable business income values from accountants' figures.
  • Covered Causes of Loss
    Basic, Broad, Special—The three levels of covered property and business income loss offered by insurers; basic and broad (with more causes of loss added) requiring that the loss be named and identified as covered, special covering any loss not specifically excluded. (Formerly referred to as "perils insured against.")


  • Debris Removal Insurance
    Coverage offered as an additional item under property insurance, with its own limits of insurance, covering the cost of cleaning up and disposing of debris from a covered loss.
  • Deductible Clauses
    Clauses that provide for the insured to pay for the first amount of loss stated in the clause, after which the insurance pays the remainder, up to the limit of insurance provided.
  • Definition of Business
    See "Business Defined"
  • Demolition Insurance
    One of the three Ordinance or Law coverages, insuring the cost of demolition and site clearance of the undamaged portions of a damaged building when demolition is required by ordinance or law.
  • Depreciation
    The amount of value of property used up over time by wear and tear or obsolescence, reducing the property's value from its cost new.
  • Directors and Officer Liability
    Liability incurred by officers or directors of organizations for alleged damages arising out of their activities as officers or directors; this liability is usually excluded from the general liability insurance of the organization, requiring separate specialized insurance.
  • Discontinued Expenses
    Expenses that do not continue after a property loss and, even though for the most part these expenses must be considered insurable in determining the amount of business income insurance to be carried, they are not covered as a part of the business income loss recovery.


  • Earth Movement Exclusion
    An exclusion found in most property insurance policies that denies coverage for damage caused by any type of earth movement, not limited to an earthquake.
  • Earthquake Exclusion
    A narrower exclusion than the earth movement exclusion, in that it does not exclude other types of earth movement besides earthquake.
  • Earthquake Insurance
    Insurance specifically insuring against loss by earthquake; it can be added by endorsement to property insurance policies or provided separately, in either case with much higher deductibles than other property insurance.
  • Employee Dishonesty
    Wrongful acts of employees against their employer normally excluded from the employer's crime coverage unless specifically included for coverage.
  • Employers Liability Exposures
    Liability of employers not covered by workers compensation insurance. Workers Compensation policies include a separate section of coverage for employers liability exposures.
  • Expected or Intended Injury
    Injury which the insured can reasonably expect to happen or intends to happen from a chosen course of action; not insurable in most circumstances.
  • Expense to Reduce Loss
    Expense incurred by an insured to reduce the amount of a business income loss that would otherwise occur. With business income insurance such expense is covered only to the extent that the loss is thereby reduced; with extra expense or combined business income and extra expense insurance the expense (if justifiable) is covered even if more than the loss is thereby reduced.
  • Explosion Exclusion
    An exclusion in the boiler & machinery policy that limits the policy to pressure explosions but not fire box explosions or combustible gas explosions. Note that property policies exclude explosions covered by the boiler & machinery policy.
  • Extended Period of Indemnity
    Business income insurance can be extended by endorsement to cover beyond the time when operations can be resumed, to allow for recovery of business momentum.
  • Extra Expense Insurance
    Insurance covering the additional cost to maintain operations or get back in operation more quickly, following property loss; it can be written alone or in conjunction with business income insurance.


  • Fire Exclusion
    Another boiler & machinery exclusion putting loss by fire, though involving a boiler or machinery, under the property insurance.
  • Firebox Explosion Exclusion
    One of the boiler & machinery exclusions limiting the insurance to steam pressure explosion but not other explosions involving boilers.
  • Flood Exclusion
    The exclusion common to most property policies forcing the insured, if flood coverage is to be provided, to purchase separate flood insurance.
  • Flood Insurance
    Coverage, principally through a federal insurance program, protecting against flood and similar water damage, excluded from most property insurance policies.
  • Forensic Investigation
    A program, involving highly trained investigators to determine the causes of losses.


  • Gross Earnings
    A term, common to earlier business interruption insurance, used to define the amount of insurance required; it meant total sales (or for manufacturers, sales value of production) less cost of goods sold (or consumed in manufacture) (See also Cost of Goods Sold.)
  • Gross Profit
    The difference between sales and the cost of goods sold before allowances for operating expenses and income taxes.


  • Height and Area Limitation
    A former limitation under ordinance or law insurance which would not pay for the added cost of reconstruction even if required by ordinance or law that exceeded the height or area of the existing structure; this limitation was omitted on later versions of the coverage.
  • Hired and Non-Owned Vehicles
    See Non-Owned and Hired Vehicles.


  • Increased Cost of Construction
    One of the three ordinance or law coverages; it pays for the added cost of rebuilding following current codes rather than rebuilding as the building was prior to loss.
  • Increased Period of Restoration
    The additional time needed following a property loss beyond the time when operations can be resumed, to bring the operation back to where it was before the loss; insurance may be purchased to cover this additional time.
  • Inland Marine Insurance
    A separate branch of property insurance, less heavily regulated and generally more competitively priced than standard property insurance, covering such things as property in transit, instruments of transportation, jewelry, and furs, customers goods held by dry cleaners, laundries, book binderies, repair facilities, etc.
  • Insurable Interest
    The requirement with property insurance that an insured, after loss, in order to receive payment must show some kind of interest in the property, whether ownership, loss of use, a contractual requirement with the owner to insure the property; insuring property with no insurable interest is a gambling contract and contrary to public policy.


  • Joint Loss Agreement
    An agreement between a boiler & machinery and a property insurer, both covering the identical property but for different risks, to share in the initial payment of any loss until the adjusters can sort out which insurer owes for what amount of the loss; the insurer owing the greater portion then reimburses the other insurer for the difference.


  • Layered Liability
    A method of writing liability insurance where insurers, rather than accepting pro rata portions of the exposure, accept layers of coverage, often above a large deductible or "self-insured retention" to be borne by the insured; the price for each successive layer is generally lower than the previous layer, but this will sometimes depend on availability and market conditions.
  • Liability Exposures
    All of the many exposures facing an insured to suit or claim for damages arising out of the insured's activities; some are covered under the insured's general or personal liability policy; others require separate specialized insurance.
  • Liquor Liability
    Liability arising out of the sale or serving of alcoholic beverages; normally excluded from general liability policies (unless added by endorsement) and requiring specialized liquor liability insurance.


  • Manufacturer Selling Price Clause
    This clause applies to goods manufactured by the insured but not yet sold (less unincurred costs and customary discounts). It is needed because the Business Income policy is based on property manufactured rather than sold by the insured.
  • Market Value Clause
    A clause for property insurance policies setting the value of merchandise for sale at its market value rather than purchase price, thus including the profit from sale in the recovery following loss.
  • Mechanical Failure Exclusion
    Exclusion in property policies that do not cover loss to property by mechanical failure; however, subsequent loss resulting from damage by the mechanical failure, if by a covered cause of loss is covered.
  • Motor Vehicles - Damage by
    This loss is covered under the motor vehicle cause of loss, with some exception.
  • Motor Vehicles - Liability for Use of
    Such losses are generally excluded under general and personal liability policies, requiring separate auto liability insurance. Exceptions apply to vehicles such as power mowers, small all-terrain vehicles, etc., not licensed for or intended for use on public