Glossary C 

CEA California Earthquake Authority.

CFP® certified financial planner®.

CGL commercial general liability.

ChFC chartered financial consultant.

CIC certified insurance counselor.

CLF chartered leadership fellow.

CLU chartered life underwriter.

COBRA See Consolidated Omnibus Budget Reconciliation Act of 1985.

CPCU® See chartered property and casualty underwriter.

CPL See comprehensive personal liability.

cancellation The termination of a policy prior to the expiration date stated in the policy. A policy may be canceled at the request of the insured or by the carrier.

  • flat Cancellation of an insurance policy as of its date of inception, without premium charge.
  • pro-rata Termination of an insurance contract or bond by the insurance company, with the premium charge then adjusted in proportion to the exact time the protection has been in force.
  • short rate A cancellation by the insured that refunds the unearned premium minus administrative expenses.

capital sum The amount paid to an insured under an accident or disability policy if the insured suffers the loss of limb, sight or hearing.

capitation A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the health services agreed upon to any covered person.

cash surrender value The amount, if any, available to the policy owner when certain life policies are surrendered.

casualty insurance This is a broad term which includes nearly every form of insurance except life, fire and its allied lines and marine and inland marine.

catastrophe An event or occurrence that causes a loss of extraordinarily large values.

causes of loss A substitute term in the Commercial Property forms that replaces the old term "perils."

certificate of insurance A memorandum stating that a policy has been issued. The certificate states the coverage afforded in general terms. A mortgagee usually insists upon holding the fire insurance policy on the mortgaged property, so a certificate of insurance is sent to the mortgagor.

chartered property casualty underwriter (CPCU) A designation awarded to qualified persons who successfully pass a series of examinations involving, in addition to insurance knowledge, the broad range of related business subjects such as accounting, economics, law, management and finance. Offered by the American Institute for Chartered Property and Casualty Underwriters.

claim A demand or notice of a right or alleged right of any party to recover from an insurance company due to a loss covered by the policy.

claimant The person making a demand for payout of benefits.

claims adjuster (or claims representative) The person responsible for investigating and settling claims covered by insurance.

claims made Policies on a "claims made" basis cover claims reported during the policy terms, regardless of the date of occurrence. In contrast, "occurrence" policies cover claims which occur during the policy term, regardless of when reported.

class rating A rate-making method in which similar insureds are placed in the same underwriting class and each is charged the same rate. clause Any specific part or provision of a policy or endorsement.

coding The process of inputting numerical and/or alphabetic data to represent policy information.

coinsurance clause A clause which requires the policyholder to maintain at all times a certain percentage of insurance to the actual value of the property insured. If they fail to maintain the required percentage, they have to pay part of every loss themselves.

coinsurer An insurer or insured that shares losses under a coinsurance agreement.

collateral assignment The assignment of a policy to a creditor as security for a debt. Under a collateral assignment, the creditor is entitled to be reimbursed out of policy proceeds for the amount owed. The beneficiary is entitled to any excess of policy proceeds over the amount due the creditor in the event of the insured's death.

collusion A secret agreement between two or more persons to defraud a third party. Collusion with intent to defraud an insurance company voids coverage under a policy of insurance.

combined ratio The sum of the expense ratio and the loss ratio. A combined ratio under 100 percent indicates an underwriting profit; a combined ratio over 100 percent indicates an underwriting loss.

commercial lines Used to refer to insurance for businesses, professionals, and commercial establishments.

commercial package policy A policy containing two or more of the following coverage parts: Commercial Property, Commercial General Liability, Commercial Crime, Commercial Inland Marine, Boiler and Machinery or Commercial Auto.

commission That portion of the premium paid to the agent in return for his/her sales and service activities.

common carrier An individual or corporation that offers its services to the public for the carrying of persons or property from one place to another for payment.

common disaster clause A clause sometimes added to a life policy which is designed to provide an alternate beneficiary in the event that the insured and the original beneficiary meet death as the result of a common accident.

common law Law based upon custom, usage and case law of the courts during the past several hundred years, as distinguished from statute law which is passed by state legislatures or congress.

comprehensive coverage This means having a wide scope, including many things. It does not mean including everything. Thus, a comprehensive liability policy is not an all-risk liability policy; there are a number of exclusions. However, it does provide far more protection than a scheduled policy. Often referred to as "comp."

comprehensive personal liability (CPL) This coverage protects individuals and families from liability for nearly all types of accidents occurring in their personal lives.

compulsory issuance Any form of insurance required by law.

concealment Withholding material facts concerning a risk or a loss. Concealment usually voids coverage.

concurrent insurance Two or more policies covering the same interest in exactly the same manner are said to be concurrent. It is extremely important that all fire policies covering the same risk should be concurrent as to forms and clauses.

conditional binding receipt A receipt given to an applicant in exchange for an initial premium, sufficient to bind the company under certain circumstances.

conditions A section in an insurance contract that lists the duties and responsibilities of both the insured and insurer.

consequential loss (or indirect loss) A financial loss that results indirectly from the occurrence of a direct physical damage or theft loss (e.g., loss of rent or rental value if a building burns).

conservation Efforts to prevent current policies from lapsing.

consideration An exchange of something of value between two parties. This is one of the requirements of a valid contract. Payment of the premium is an applicant's consideration. The company's promise to pay proceeds is its consideration.

Consolidated Omnibus Budget Reconciliation Act of 1985 (Cobra) Federal legislation mandating that participants in health care plans be allowed to continue their coverage, under certain circumstances for a specific period of time, after it would normally end.

constructive total loss A partial loss of such severity that the cost of repairing the damaged property plus salvage value is more than the property is worth in a repaired state.

contingent beneficiary A person entitled to receive policy benefits if the primary beneficiary is deceased at the time benefits become payable.

contract An agreement entered into by two or more persons under which one or more of them agree to do or refrain from doing acts in accordance with the wishes of the other party(s).

contract carrier A transportation company that carries the goods of only certain customers, and not the public in general (as in the case of a common carrier).

contractual liability Liability assumed under any written or oral contract. This kind of liability is excluded by the automobile liability policy and most other liability policies.

contribution clause See coinsurance clause.

contributory negligence Lack of care by the injured person when such lack of care helps to cause the accident. Under common law, contributory negligence may bar the right to recover damages.

controlled business Business written by a producer covering the life, property or interests of that producer and members of his or her immediate family.

conversion 1) The wrongful use of disposition of another person's property by someone who is in lawful possession of it. 2) In life insurance: changing a life policy, at the policy owner's request, from a term policy to a permanent policy without new evidence of insurability. Conditions and limitations in the original term policy vary by plan.

countersignature Signature of an insurer's representative validating an insurance contract.

coverage The specific protection provided by the policy against the results of the hazards insured against.

credit life insurance Usually written as decreasing term life insurance on a group or an individual. The amount of coverage is based on the amount of a loan. If the insured borrower dies, the balance due is canceled.

credit report (or consumer report) A confidential report obtained from a professional reporting agency on the financial, physical and moral status of an applicant or insured.

customer A person who secures insurance through an agent or broker and depends on the agent or broker for help and advice.