INSURED - A person or a corporation who contracts for an insurance policy that indemnifies (protects) him against loss or damage to property or, in the case of a liability policy, defend him against a claim from a third party.
NAMED INSURED - Any person, firm or corporation specifically designated by name as an insured(s) in a policy as distinguished from others who, though unnamed, are protected under some circumstances. For example, a common application of this latter principle is in auto liability policies wherein by a definition of "insured", coverage is extended to other drivers using the car with the permission of the named insured. Other parties can also be afforded protection of an insurance policy by being named an "additional insured" in the policy or endorsement.
ADDITIONAL INSURED - An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insureds policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insureds impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).
CO-INSURANCE - The sharing of one insurance policy or risk between two or more insurance companies. This usually entails each insurer paying directly to the insured their respective share of the loss. Co-insurance can also be the arrangement by which the insured, in consideration of a reduced rate, agrees to carry an amount of insurance equal to a percentage of the total value of the property insured. An example is if you have guaranteed to carry insurance up to 80% or 90% of the value of your building and/or contents, whatever the case may be. If you don't, the company pays claims only in proportion to the amount of coverage you do carry.
The following equation is used to determine what amount may be collected for partial loss:
Amount of Insurance Carried x Loss
Amount of Insurance that = Payment
Should be Carried
Example A Mr. Right has an 80% co-insurance clause and the following situation:
$100,000 building value
$ 80,000 insurance carried
$ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be collected:
$80,000 x $10,000 = $10,000
$80,000
Mr. Right recovers the full amount of his loss because he carried the coverage specified in his co-insurance clause.
Example B Mr. Wrong has an 80% co-insurance clause and the following situation:
$100,000 building value
$ 70,000 insurance carried
$ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be collected:
$70,000 x $10,000 = $8,750
$80,000
Mr. Wrong's loss of $10,000 is greater than the company's limit of liability under his co-insurance clause. Therefore, Mr. Wrong becomes a self-insurer for the balance of the loss-- $1,250.
PREMIUM - The amount of money paid by an insured to an insurer for insurance coverage.
DEDUCTIBLE - The first dollar amount of a loss for which the insured is responsible before benefits are paid by the insurer; similar to a self-insured retention (SIR). The insurer's liability begins when the deductible is exhausted.
NAMED INSURED - Any person, firm or corporation specifically designated by name as an insured(s) in a policy as distinguished from others who, though unnamed, are protected under some circumstances. For example, a common application of this latter principle is in auto liability policies wherein by a definition of "insured", coverage is extended to other drivers using the car with the permission of the named insured. Other parties can also be afforded protection of an insurance policy by being named an "additional insured" in the policy or endorsement.
ADDITIONAL INSURED - An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insureds policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insureds impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).
CO-INSURANCE - The sharing of one insurance policy or risk between two or more insurance companies. This usually entails each insurer paying directly to the insured their respective share of the loss. Co-insurance can also be the arrangement by which the insured, in consideration of a reduced rate, agrees to carry an amount of insurance equal to a percentage of the total value of the property insured. An example is if you have guaranteed to carry insurance up to 80% or 90% of the value of your building and/or contents, whatever the case may be. If you don't, the company pays claims only in proportion to the amount of coverage you do carry.
The following equation is used to determine what amount may be collected for partial loss:
Amount of Insurance Carried x Loss
Amount of Insurance that = Payment
Should be Carried
Example A Mr. Right has an 80% co-insurance clause and the following situation:
$100,000 building value
$ 80,000 insurance carried
$ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be collected:
$80,000 x $10,000 = $10,000
$80,000
Mr. Right recovers the full amount of his loss because he carried the coverage specified in his co-insurance clause.
Example B Mr. Wrong has an 80% co-insurance clause and the following situation:
$100,000 building value
$ 70,000 insurance carried
$ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be collected:
$70,000 x $10,000 = $8,750
$80,000
Mr. Wrong's loss of $10,000 is greater than the company's limit of liability under his co-insurance clause. Therefore, Mr. Wrong becomes a self-insurer for the balance of the loss-- $1,250.
PREMIUM - The amount of money paid by an insured to an insurer for insurance coverage.
DEDUCTIBLE - The first dollar amount of a loss for which the insured is responsible before benefits are paid by the insurer; similar to a self-insured retention (SIR). The insurer's liability begins when the deductible is exhausted.
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