Property Insurance Terms and Concepts

Replacement Cost

• The cost to replace an insured item at current market prices without deduction for depreciation.

• The cost to repair an insured item at current market prices with deduction for depreciation.

• The cost to replace an insured item at historical prices without deduction for depreciation.

• The cost to replace an insured item at current market prices with a deduction for depreciation.

Blanket vs. Specific Coverage

• Blanket coverage insures a particular item or location.

• Specific coverage insures multiple items or locations under a single limit.

• Blanket coverage insures multiple items or locations under a single limit.

• Specific coverage provides coverage for all items under one policy.

Deductible

• The amount the insured must pay out of pocket before the insurer pays a claim.

• The total amount covered by the insurance policy.

• The percentage of the claim that the insurer will pay.

• The maximum limit of coverage provided by the insurer.

Stated/Agreed Value

• A value that is determined by the market at the time of loss.

• A value that is agreed upon by the insurer and insured at the time of policy issuance.

• A value that fluctuates based on the current market conditions.

• A value that is set by the insurance company without input from the insured.

Speculative Risk

• A risk that presents the chance of loss or gain.

• A risk that only results in a loss.

• A risk that has no financial implications.

• A risk that is guaranteed to result in a profit.

Proximate Cause

• The immediate reason for an event to occur.

• The primary cause of a loss in a chain of events.

• A secondary factor that contributes to an outcome.

• An unrelated event that has no impact on the situation.

Salvage Value

• The value of an asset after depreciation has been accounted for.

• The estimated value that an asset will realize upon its sale at the end of its useful life.

• The cost of acquiring an asset before any depreciation.

• The total value of an asset at the time of purchase.

Vicarious Liability

• Legal responsibility assigned to one party for the actions of another.

• A type of insurance coverage for personal injuries.

• A legal term for self-defense in criminal cases.

• The obligation to compensate for damages caused by one's own actions.

Endorsements

• Changes to the premium amount of an insurance policy.

• Amendments or additions to an insurance policy that change its terms or coverage.

• Documents that outline the exclusions of an insurance policy.

• Standard terms and conditions of an insurance policy.

Absolute Liability

• Liability that requires proof of negligence.

• Liability that does not depend on actual negligence or intent to harm.

• Liability that is limited to intentional acts.

• Liability that is only applicable in criminal cases.