Professional Liability Insurance Glossary

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Professional Liability Insurance
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Adjustable Rate

As opposed to a fixed interest rate, this is any insurance rate that can change over time. An adjustable rate often moves based upon an exterior indicator, such as rate of prime interest.

Advertising Injury

Harm or financial loss incurred by a consumer based upon a company's false advertising.
Agent: Also referred to as a 'broker,' this is a trained, licensed professional working within the insurance business.

Aggregate

Carrying the definition of 'total' or 'sum,' this word often precedes terms such as indemnity, risk, or limit.

Broker

Also referred to as an 'agent,' this individual is a trained, licensed professional working within the insurance business.

Capital

Money or other resources used in a manner that is meant to generate income. Can also refer to a company's net worth.

Declaration

In insurance dealings, this is the section of a contract containing simple information such as home address, phone number, and so forth.

Deductible

The amount the insured agrees to pay at the time of a covered incident before insurance payments will begin.

Domiciled

Considered to have a particular country or location as one's permanent home.

Experience Rating

This is a way of determining premium payments based on the number of claims or aggregate dollar sum of claims made by the insured in the previous year.

Fraud

A term that indicates criminal activity, fraud is an intentionally deceptive act that obstructs or perverts the truth of a given situation.

Incompetence

The state of being unable to perform a given duty or task up to established standards of quality.

Incurred Losses

The losses occurring in a predetermined period of time.

Indemnification Clause

A provision included in some contracts wherein one party agrees to indemnify or 'hold harmless' the other party in terms of certain losses, damages, and claims.

Informed Consent

Consent given after a party has been provided full relevant information.

Injury

A type of damage incurred by a claimant. Harm resultant of another party's product or actions.

Insurance Gap

Refers to a lapse in coverage, possibly the result of neglect to immediately renew a policy.

Liability

The legally binding obligation to settle a debt. This can pertain to an individual or a business.

Liability Risk

The perceived risk a company or individual stands of being held liable for certain losses or damages.

Limit

Top-most amount to be paid out by an insurance company to an insured member under a qualifying circumstance.

Loss

Amount spent or debt incurred in the course of defending oneself or company against a claimant. Can also refer to a type of damage a claimant names when pursuing action against an individual or company

Loss Control

Alternately known as risk control or risk management, this is any effort taken by the insured to minimize risk of or extent of loss.

Loss Ratio

The number one arrives to having divided losses by paid premiums.

Malpractice

A category of professional liability insurance specifically for medical professionals.

Negligence

Sometimes synonymous with 'omission,' this refers to the failure to act in some needed way.

Net Earned Premium

In accordance with an agency's liability for unearned premiums, this is the yearly net premium adjustment.

Net Written Premium

The premium as it stands after commission and ceded reinsurance have been subtracted out.

Non-assessable

Policy under which an insurance company is precluded for assessing those insured for any extra amount to make up for company shortfalls.

Nonstandard Risk

Can refer to a level of assessed risk higher than the average.

Nose Coverage

Period of time between inception date of policy and a specified retroactive date in claims-made liability polices wherein the retroactive date comes prior to inception date.

Occurrence Policy

Policy covering claims arising in a given period of time, irrespective of when the claims were reported.

Paid Losses

The specific amount of loss already paid by an insurance company.

Peril

A qualifying circumstance which could reasonably lead to loss. Retroactively, the scenario that led to the loss.

Personal Injury

Usually bodily injury, direct harm incurred by one party due to the actions or product or another party.

Personal Property

One's individually owned possessions. Personal property can be one's home, car, furniture, etc.

Policy

The specific insurance agreement worked out between an insurance company and the insured individual or company.

Premium

The recurring payment that keeps one's insurance policy active.

Punitive Damages

Compensation above and beyond that required to take care of real damages. When one is ruled to pay an excessive amount by the courts, it is deemed a punishment.

Qualifying Event

An event designated in the terms of one's insurance policy.

Reinsurance

Refers to the practice by multiple insurers to share insurance policies, thereby reducing risk to individual companies.

Retrospective Rating

Means of establishing premium rates based upon current year's (as opposed to past year's) experience.

Risk Classifications

Categories of risk as designated by terms of an insurance policy.

Risk Management

Another term for 'loss control,' risk management refers to efforts by the insured party minimize any an all risks.

Tort

Excluding a breach of contract, tort is term for a civil wrong.

Underwriting

The process of insuring, or providing insurance to, another individual or company.

Vicarious Liability

Designated responsibility of one party for the acts of another.