Glossary of Insurance Terms

P

Package policy - Any combination of insuring agreements that combines property and casualty coverages. Homeowners, businessowners, and garage policies are examples.

Paid losses - The losses that have been paid for a claim.

Pair and set clause - Clause that stipulates that partial loss to a pair or set of items will be valued in terms of the lost item, not on the basis of reduced value of the pair or set.

Partial loss - A property loss that is less than a total loss. See Constructive total loss.

Partnership - A business model in which two or more individuals join together to conduct business and share profit and losses. Commercial insurance policies usually differentiate in the "Who Is Insured" section between corporations, partnerships, and other business models. Therefore, the type of model being insured is important.

Pay-at-the-pump - A device for making sure all motorists are insured; the theory being that premiums for basic liability coverage could be collected through "taxes" at the gasoline pump in a relatively painless manner, thus eliminating the uninsured motorist.

Payment bond - Sometimes also called a "labor and materials bond," this bond guarantees that bills owed by the contractor will be paid as they come due. The agreement may be incorporated into the performance bond.

PD - A shorthand expression for "property damage."

Peak season endorsement - Instead of buying insurance amounts reflecting values at the height of inventory, some enterprises are able to forecast times when values will be at their peak and use this endorsement to increase the amount of insurance during that specific interval.

"Pen," The, see Managing General Agent (MGA).

Per occurrence/per loss excess reinsurance treaty - An agreement under which losses above a certain dollar amount are ceded to the reinsurer, who is responsible for all losses from any one exposure above this amount up to the reinsurance limit. The retention is expressed as an amount incurred per occurrence. An occurrence may be one hurricane, one flood, or one accident that results in injuries to multiple people.

Per risk excess reinsurance treaty - Similar to a per occurrence/per loss excess treaty except in the matter of the retention. The retention applies separately to each subject of insurance.

Performance bond - A bond that guarantees the property owner (the "obligee") that the contractor with the winning bid on a job will perform as promised and on time.

Peril - A potential cause of loss.

Perils of the sea - Somewhat akin to open perils on land, the term refers to any potential cause of loss derived from shipment on a seagoing vessel.

Period of restoration - The period of time following a loss that is necessary to restore a business or organization to a pre-loss condition.

Personal articles floater - Before the advent of packaged forms and broad coverages, households commonly had fire insurance on dwelling and personal property with the possible addition of extended coverage. The personal articles floater is an inland marine form that was used by the affluent for scheduling open perils coverage for various articles and classes of valuable personal property. A homeowners endorsement accomplishes the same thing today and the personal articles floater is no longer widely written.

Personal auto policy - The form currently promulgated by Insurance Services Office (ISO) for coverage of personal auto liability and physical damage exposures.

Personal injury - Distinguished from "bodily injury," this term relates to injury inflicted by way of false arrest, invasion of privacy, malicious prosecution, and so on. It is written as Coverage B of the commercial general liability forms and as homeowners Coverage E.

Personal Injury Protection (PIP) - The section of an auto policy in a no-fault state that responds to physical injury, loss of income, etc., of the insured regardless of fault.

Personal liability insurance - Insurance for individuals or members of a household offering protection against claims by third parties (outsiders) alleging bodily injury or property damage due to negligence. See also Premises medical payments.

Personal lines - Insurance covering the liability and property damage exposures of private individuals and their households. Contrast with Commercial lines.

Personal property - Term used in insurance to distinguish chattels from real property.

Physical Hazard - A hazard that arises from the material, structural, or operational features of the risk itself apart from the persons owning or managing it.

Physicians and surgeons professional liability insurance, see Professional liability.

Plate glass coverage - Provides "special" protection, except for the perils of war, nuclear reaction, and fire. (Fire is covered under the building policy.) This coverage is for full replacement cost and covers the expense of repairing frames, installing temporary plates, or boarding up openings.

Policy year - Unique to the insurance business, this is a means of cost accumulation in which the aggregate transactions of all policies becoming effective in a given year determine the financial performance of those policies. Policyholder, see Insured.

Policyholders’ surplus - The amount of money available to an insurer to meet its obligations to its policyholders, after subtracting liabilities.

Pollution liability insurance - Coverage for bodily injury or property damage caused by a "pollution incident." Insurance Services Office has two forms, one limited to on-site clean up of pollution spills.

Pool - An organization in which insurers cover certain types of risks as a group and share premiums, expenses and losses. Pools are often used to underwrite larger risks.

Portfolio - All of an insurer’s in-force policies and outstanding losses, respecting described segments of its business.

Power-of-attorney - Commonly used in bonding, this document conveys authority for the individual(s) named on it to execute bonds and other legal documents.

Premises - Generally, a piece of land with a building or buildings upon it.

Premises and operations liability - Once known as owners, landlords, and tenants legal liability, or as manufacturers and contractors liability, depending on the business’s activity, the term refers to the liability exposure of business entities to third parties (customers, guests, and passers by) who may become injured or have property damaged through the negligent acts of the business persons, their agents, or employees. Coverage of this exposure is by way of the commercial general liability policy. Contrast with Products and completed operations liability.

Premises and operations medical payments - Bodily injury rather than liability is the trigger for this coverage. Sometimes referred to as "customer good will insurance," it is a relatively inexpensive addition to the commercial general liability policy and an automatic feature of personal liability protection. Since it responds to injury of customers or guests without regard to fault, it is sometimes effective in heading off a potentially much more serious liability claim against the owner or tenant of the business premises or private residence.

Premium - Term for the amount of money the insured pays the insurer to purchase insurance.

Pressure vessel - In boiler and machinery insurance, a type of container designed to hold liquids or gasses under pressure. Types are categorized as fired (such as a boiler) and unfired (such as an oxygen or hydrogen tank).

Price-Anderson Act of 1957 - Federal law that requires evidence of financial responsibility for all privately owned nuclear reactors, spent fuel reprocessing plants, and for fuel fabrication plants licensed to process five or more kilograms of plutonium.

Primary insurance - The first policy or coverage to apply. Contrast with Excess insurance.

Principal - Used in suretyship, it refers to the individual whose performance is guaranteed.

Prior Approval - Indicates that an insurer must have rate or form changes formally approved by the state insurance department before it can use them Private Passenger Automobile - A four wheeled motor vehicle, subject to state registration laws, designed to carry passengers (such as a car, station wagon, SUV, or van) on public roads.

Pro rata cancellation, see Cancellation.

Producer - A term identifying the insurance agent, field rep, or other employee who sells insurance.

Product recall insurance - Coverage for the costs of recalling a product known, or suspected to be, defective.

Products and completed operations liability - The liability exposure of the manufacturer whose malfunctioning products may cause injury or property damage or of the contractor whose failed structures or projects may do the same. Coverage of the exposure is a feature of the commercial general liability policy. The insurance does not in any way constitute a guarantee of either the insured’s product or work. Contrast with Premesis and operations liability.

Professional Insurance Agents (PIA) - Trade association of insurance agents.

Professional liability - A form of errors and omissions insurance, (sometimes called "malpractice" coverage for errors alleged against those in the healing and legal professions). Arbitrarily it seems, "errors and omissions" is the term applied most often to insurance covering liability for mistakes in matters affecting property, i.e., coverage for "Insurance Agents E&O," "Architects E&O" while "professional liability" is used in reference to coverages such as "Druggists Professional Liability," "Physicians and Surgeons Professional Liability," and "Lawyers Professional Liability."

Promulgate - To develop, file, publish, and put into effect insurance rates or forms. Proof of loss - Following a loss, a formal statement given by an insured to the insurer that includes details of the loss such as the original cost of damaged or destroyed property.

Pro-rata or proportional reinsurance - A certain portion of every risk is ceded under a proportional agreement. The insurer and reinsurer agree to share a portion of all insurance, premium, and losses in the same amount. The insurer is paid a commission for ceding the risk portion and premium to the reinsurer.

Prospect - A potential buyer of an insurance policy or program.

Protection and Indemnity (P&I) insurance - The nautical equivalent of bodily injury and property damage liability.

Proximate cause - That event which, in an unbroken sequence, results in direct physical loss under an insurance policy. For example, wind is the proximate cause of loss when a windstorm blows out a window that in turn topples a lit candle that sets fire to a structure and burns it down.

Public adjuster - An individual or member of a firm who contracts with private parties to aid with the preparation of loss statements and presentation to insurers. Contrast with Independent adjuster.

Public liability insurance - General term for any liability coverage for claims brought against the insured by a third party or member of the public.

Public official bond - A "performance bond" for holders of public office.

Punitive damages - An award for damages above and beyond the requirements for compensating third parties for injury or damage. As the word implies the award is meant to punish the offender. Most states and territories permit punitive damages awards to be covered by liability insurance.

Pure risk - The only consideration is the possibility of loss or no loss, but not making a profit. Contrast with Speculative risk.