Common Insurance Terms

Assessability:  A characteristic of some insurance policies in which policyholders are obliged to pay money, in addition to premiums, if the insurer experiences losses.

 

Binder:  A temporary coverage agreement that is used until an insurance policy is formally in effect.

 

Claims Made Insurance Policy:  An insurance policy that provides coverage for claims arising from incidents that both occur and are reported to the insurance company while the policy is in force. A claims made policy is in force  from the starting date of the initial policy period (the retroactive date) and continues in force from that date through each subsequent renewal. When a claims made policy is terminated, future claims arising from incidents that occurred during the policy period are not covered unless "tail coverage" is purchased.

 

Deductible:  The amount of a claim payment that is subtracted from the insurer's payment and for which the insured is financially responsible.

 

Exclusions:  The component of an insurance policy that sets forth the circumstances under which the physician will not be covered.

 

Insurance Company:  A company, also known as an insurer, a carrier, or a provider, that is empowered by a state to sell some or all types of insurance.

 

Limits of Liability:  The maximum amount an insurer will pay out under the terms of a policy. Professional liability policies typically specify both a per occurrence limit and an aggregate limit for all claims incurred during the term of a contract, e.g. $1 million (per occurrence) / $3 million (aggregate).

 

Occurrence Policy:  A type of professional liability insurance policy in which the policyholder is covered for any incident that occurs during the term of the policy, regardless of when a claim arising from the incident is made.

 

Premium Credit:  A reduction in premium that acknowledges an expected reduction in risk due to claims history, completion of a risk management course, or a variety of other factors.

 

Prior Acts:  Incidents that may have occurred, but have not yet been filed as claims, prior to the onset of the company - insured relationship. Companies typically require a new insured to purchase supplemental coverage (either tail or prior acts coverage) to protect against claims arising from prior acts.

 

Prior Acts Coverage:  A supplement to a claims made insurance policy that may be purchased from a new carrier when a physician changes carriers and had claims made coverage with the previous carrier. A prior acts policy, also known as nose coverage, covers incidents that occurred prior to the beginning of the new insurance relationship but for which no knowledge of any claim possibility exists.

 

Tail Coverage:  A supplement to a claims made policy that provides coverage for any incident that occurred while the claims made insurance was in effect but had not been brought as a claim by the time the insurer-policyholder relationship terminated. Tail coverage, also known as an Extended Reporting Endorsement, is generally necessary whenever an insured covered by a claims made policy does not continue an active policy.