An unplanned, unforeseen event which occurs suddenly and at a specific place.
Arbitration is a method of claim settlement used when the insured and the insurer cannot agree on the amount of the loss.
Cancellation is the termination of an in-force insurance policy, either by the insured or the insurer, prior to the expiration of the policy.
Consideration refers to what both you and the insurer provide in the insurance agreement. You give accurate information and pay the premium, while the insurer promises to cover potential losses. It’s the mutual exchange that forms the basis of your insurance relationship.
Example of Consideration: When you purchase auto insurance, you pay the premium, and the insurance company commits to covering accident-related expenses.
Question: What happens if my business fails to pay the premium?
Failure to pay premiums can result in a lapse of coverage, leaving your business vulnerable to uninsured risks.
The Continuity Date refers to the date your business initially obtained insurance coverage. It’s crucial for claims-made policies, as they only cover claims made during the policy period if the incident occurred after the Continuity Date.
Example: Your business purchased professional liability insurance on May 1, 2021. If a client files a claim for an incident on June 1, 2021, it won’t be covered because it occurred after your Continuity Date.
Question: What if my Continuity Date is in the past and I switch insurers?
When switching insurers, the new policy’s Retroactive Date should align with your prior policy’s Continuity Date to ensure coverage continuity.
A contract is an agreement between two or more parties enforceable by law.
The declarations section of your policy contains vital information like your name, coverage amount, and premiums. Think of it as your insurance ID card – it holds essential details about your coverage.
Example of Declarations: In your commercial property insurance declarations, you’ll find information about the property location, coverage limits, and the types of perils covered.
Question: Can I update my policy declarations as my business changes?
Yes, it’s important to keep your insurer informed about any changes to ensure accurate coverage.
Exclusions are specific situations or conditions not covered by your policy. They help define when your insurance won’t apply.
Example of Exclusions: Your business interruption insurance might exclude losses due to a pandemic, meaning you wouldn’t be covered for business income losses during such an event.
Question: Can I get coverage for excluded events?
In certain cases, you can add endorsements or riders to your policy to cover specific exclusions.
A hazard is a circumstance that increases the likelihood of a loss. There are three types of hazards:
- Physical – a physical condition
- Moral – A tendency toward increased risk
- Morale – An indifference to loss
Indemnity ensures your business receives compensation for a loss, helping to restore your financial standing before the incident occurred.
Example of Indemnity: If your commercial property is damaged due to a covered event, your business insurance will reimburse you for the repair costs to restore the property’s value.
Question: Will my business always receive full compensation for a loss?
Depending on your policy terms, you might receive reimbursement up to the policy limits.
Insurable interest is any interest an insured may have in property that is the subject of insurance, so that damage or destruction of that property would cause the insured financial loss.
Law of Large Numbers
The Law of Large Numbers is a principle in insurance stating that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
Example of The Law of Large Numbers:
When an insurance company issues a policy on a 45-year-old female, the company really has no way of knowing or accurately predicting when or how she will die. The Law of Large Numbers looks at a large group, in this case 45-year-old females with similar lifestyles and health conditions, and makes some conclusions based on the statistics of past losses.
Liability refers to your business’s legal responsibility under the law. It encompasses both strict liability and vicarious liability.
Example of Liability: If a customer slips and falls in your store, your general liability insurance will cover the customer’s medical expenses and potential legal fees.
Question: Is liability insurance a must for businesses?
Liability insurance is often essential, protecting your business against potential legal claims and associated costs.
Loss valuation is a factor in determining the premium charged and the amount of insurance required. There are six types of loss valuation:
- Actual Cash Value (ACV)
- Replacement Cost
- Market Value
- Agreed Value
- Stated Value
- Salvage Value
Negligence is the failure to use care that a reasonable, prudent person would use under the same or similar circumstances.
Nonrenewal occurs when your insurance policy isn’t renewed upon expiration, either by your insurer or your business.
Example of Nonrenewal: If your business’s risk profile changes significantly, your insurer might choose not to renew your business insurance policy.
Question: Can I switch to a different insurer if my policy isn’t renewed?
Yes, you’re free to explore other insurance providers if your policy isn’t renewed.
Occurrence is a broader definition of loss, which differs from accident in that it includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.
Perils are the causes of loss insured against in an insurance policy. For example, property insurance insures against the loss of physical property or the loss of its income-producing capacity.
Policy limits represent the maximum amount your insurer will pay for a covered loss, setting a cap on the claim payout.
Policy Limits Example: If a fire damages your business property, your property insurance will cover repair costs up to the policy’s limit.
Question: What if my business’s loss surpasses the policy limits?
If your loss exceeds the limits, you’re responsible for the additional costs unless you have excess coverage.
A premium is a periodic payment to the insurance company to keep the policy in force.
Prior Acts Insurance
Prior Acts Insurance, also known as “tail coverage,” extends coverage to claims arising from incidents that occurred before your policy’s effective date. It’s vital when switching insurers or when your new policy excludes coverage for past events.
Example of Prior Acts: If your business switches liability insurance providers, Prior Acts Insurance will cover a customer’s injury claim resulting from an incident that occurred before you switched policies.
Question: Can I purchase Prior Acts Insurance for all past incidents?
Generally, you can only purchase tail coverage for incidents within a specified timeframe. Be sure to check with your insurer.
Proof of Loss
Proof of Loss is documentation that substantiates your claim after a loss occurs. It details the cause, extent, and value of the loss.
Example: If your business experiences a fire damaging your property, you’ll need to provide photos, repair estimates, and other documentation as Proof of Loss for your property insurance claim.
Question: How should I prepare Proof of Loss for my business?
Collect evidence immediately after a loss, including photos, estimates, invoices, and any relevant documents to support your claim.
The Retroactive Date is the point from which your policy provides coverage for past incidents. Claims arising from events before this date are usually excluded.
Retroactive Date Example: Your business liability insurance has a Retroactive Date of January 1, 2022. Claims related to incidents before this date won’t be covered by your current policy.
Question: Can I change my policy’s Retroactive Date?
Retroactive Dates are typically set by insurers and can’t be changed. Ensure it aligns with your business history.
Risk is the uncertainty as to the outcome of an event when two or more possibilities exist.
Subrogation grants your insurer the right to seek reimbursement from third parties responsible for a covered loss.
Example of Subrogation: If a defective product damages your business property, your insurer may recover costs from the product manufacturer.
Question: Can my business still file a claim if my insurer subrogates?
Yes, your business can proceed with the claim process while your insurer seeks reimbursement.
Underwriting involves evaluating your business’s eligibility for insurance coverage and determining its terms based on risk assessment.
Underwriting Example: During the underwriting process, an insurer reviews your business’s industry, operations, and history to determine premiums for business insurance.
Question: Can I influence the underwriting process for my business?
Accurate and complete information from your end ensures fair underwriting and appropriate coverage tailored to your business needs.Talk To An Expert