A little guide to insurance terms
Buys and owns an insurance policy for protection
Changes the policy
A promise to protect or make whole again
Legal contract outlining price, coverage and exclusions
The chance of a covered loss occurring
Sells and negotiates coverage to the applicant/insured
Company providing insurance coverage
Temporary proof of coverage
Searches for best priced coverage
Reviews the applicant for pricing coverage and acceptability
MGA / MGU
Has the pen / authority to act on behalf of insurer
Condition increasing chances of a covered loss
Insured – Individual or entity covered under an insurance policy against insured perils.
Endorsement – Special provisions added to an insurance policy to enhance or restrict its coverage.
Insurance – Risk-transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party.
Policy – Formal contract-document issued by an insurance company to an insured. It (1) puts an indemnity cover into effect, (2) serves as a legal evidence of the insurance agreement, (3) sets out the exact terms on which the indemnity cover has been provided, and (4) states associated information such as the (a) specific risks and perils covered, (b) duration of coverage, (c) amount of premium, (d) mode of premium payment, and (e) deductibles, if any.
Policy Premium – A policy’s premium is its price, determined by the insurer based on your or your business’s risk profile, which may include creditworthiness.
Risk – A situation where the probability of a variable (such as burning down of a building) is known but when a mode of occurrence or the actual value of the occurrence (whether the fire will occur at a particular property) is not.
Retail Agent – An insurance agent who acts as an intermediary between an insured and the marketplace. In some instances, retail agents deal directly with an insurer in arranging coverage, while in others, retail agents work with managing general agents or wholesale brokers to secure coverage for their client-insured.
Insurer/Carrier – Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.
Binder – A legal agreement issued by either an agent, MGA, or an insurer to provide temporary evidence of insurance until a policy can be issued. Binders should contain definite time limits, should be in writing, and should clearly designate the insurer with which the risk is bound, the amount of insurance, the type of policy, and the perils insured against.
Underwriter – Qualified individual who evaluates an insurance proposal to assess the kind and degree of risk involved. He or she then determines how much premium should be charged for protecting the applicant against losses that may arise from the risk.
MGA – A specialized type of insurance agent/broker that, unlike traditional agents/brokers, is vested with underwriting authority from an insurer.
Hazard – Condition or situation that creates or increases the chance of loss in insured risk.