Actual Cash Value – Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old sofa will not be replaced at current full value because of a decade of depreciation. Actuary – A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics. (Americanism: In most other countries the individual is known as “mathematician.”)

Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted.

Agent -individual who sells and services insurance policies in either of two classifications:

1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent’s commission is a percentage of each premium paid and includes a fee for servicing the insured’s policy.

2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

Assets – Assets refer to “all the available properties of every kind or possession of an insurance company that might be used to pay its debts.” There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real estate. All other assets refer to non-income producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some states don’t permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them “non-admissable.”

Automobile Liability Insurance – Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.

Broker – Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Broker-Agent – Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant’s coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.

Captive Agent – Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions.

Casualty – Liability or loss resulting from an accident.

Casualty Insurance – That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.

Claim – A demand made by the insured, or the insured’s beneficiary, for payment of the benefits as provided by the policy.

Collision Insurance – Covers physical damage to the insured’s automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.

Commercial Lines – Refers to insurance for businesses, professionals and commercial establishments.

Comprehensive Insurance – Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.

Deductible – Amount of loss that the insured pays before the insurance kicks in.

Exclusions – Items or conditions that are not covered by the general insurance contract.

Exposure – Measure of vulnerability to loss, usually expressed in dollars or units.

Floater – A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewelry or sports equipment.

General Liability Insurance -Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.

Hazard – A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.

Hazardous Activity – Bungee jumping, scuba diving, horse riding and other activities not generally covered by standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover liability and personal accident, which should be provided by the company hosting the activity.

Inflation Protection – An optional property coverage endorsement offered by some insurers that increases the policy’s limits of insurance during the policy term to keep pace with inflation.

Insurable Interest – Interest in property such that loss or destruction of the property could cause a financial loss.

Insurance Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an “as needed” basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee. A.M. Best’s Directory of Recommended Insurance Attorneys and Adjusters lists independent adjusters only.

Liability – Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.

Liability Insurance – Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.

Liquidity – Liquidity is the ability of an individual or business to quickly convert assets into cash without incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick liquidity refers to funds–cash, short-term investments, and government bonds–and possessions which can immediately be converted into cash in the case of an emergency. Current liquidity refers to current liquidity plus possessions such as real estate which cannot be immediately liquidated, but eventually can be sold and converted into cash. Quick liquidity is a subset of current liquidity. This reflects the financial stability of a company and thus their rating.

Occurrence – An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn’t have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.

Peril – The cause of a possible loss.

Personal Injury Protection – Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.

Personal Lines – Insurance for individuals and families, such as private-passenger auto and homeowners insurance.

Policy – The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Premium – The price of insurance protection for a specified risk for a specified period of time.

Premium Earned – The amount of the premium that has been paid for in advance that has been “earned” by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

Premium Unearned – That part of the premium applicable to the unexpired part of the policy period.

Renewal – The automatic re-establishment of in-force status effected by the payment of another premium.

Replacement Cost – The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

Risk Class – Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.

Risk Management – Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

Standard Auto – Auto insurance for average drivers with relatively few accidents during lifetime.

Term Life Insurance – Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn’t build up any of the nonforfeiture values associated with whole life policies.

Tort – A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.

Total Loss – A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.

Umbrella Policy – Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

Underwriter – The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

Underwriting – The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

Unearned Premiums – That part of the premium applicable to the unexpired part of the policy period.

Uninsured Motorist Coverage – Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.

Universal Life Insurance – A combination flexible premium, adjustable life insurance policy.

Variable Life Insurance – A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.

Variable Universal Life Insurance – A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.

Waiver of Premium – A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the insured is disabled.

Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life and which pay