3.4 Common Policy Provision Copy

Named Insured

The person, persons or business actually named as the named insured in the policy declarations.

Insured

Anyone who may be covered by the insurance.

Policy Period

Every policy has a policy period which is entered in the declarations. Since coverage applies only to loss or damage that occurs during the policy period, it is important to specifically define the coverage period.

Policy Territory

Usually the United States, Canada and Puerto Rico.

Cancellation and Non-renewal

Generally, a named insured can have a policy cancelled at any time by giving written notice to the insurer.

For mono-line property insurance policies, including homeowner’s insurance, an insurer must give at least 14 days’ notice of cancellation for nonpayment of premium, and at least 30 days’ notice of cancellation for any other reason. For commercial package policies, the insurer is only required to give 10 days’ notice of cancellation for any reason, and it is also required to give at least 60 days’ notice of non-renewal. For personal auto policies, an insurer must give the named insured at least 10 days’ notice of cancellation, and at least 30 days’ notice of non-renewal.

Deductible

The amount of a loss which the insured must absorb before the insurer begins to pay the additional loss.

Pro Rata

The amount paid by each company is determined by adding the limits of all policies that cover the loss, then dividing the limit of the first policy by the total amount of insurance available. The figure that results is multiplied by the amount of the loss to determine that policy’s payment amount.

Limits of Liability

Each policy or coverage part will have a declarations section for listing the limits of liability. Different forms may use different wording – limit of insurance, amount of insurance, and limit of Liability mean the same thing.

Vacancy or Un-occupancy

Vacant- The absence of both people and property from the premises.

Unoccupied– The absence of people.

Named Insured Provisions

Duties After Loss– Condition found in property-casualty policies that explain the insured’s responsibilities after a loss occurs.

Assignment– Condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing.

Abandonment- A condition often contained in property insurance policies that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value.

Insurer Provisions

Liberalization- Condition found in property insurance contracts that provides that if a law is passed that broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policy endorsements will be construed to contain broadened coverage.

Subrogation- The transfer to the insurance company of the insured’s right to collect damages from another party.

Salvage– Damaged property that can be retrieved and reconditioned then sold to reduce an insured loss.