An indemnification clause is a contractual provision where one party (the indemnifier) agrees to compensate another party (the indemnitee) for losses, damages, or liabilities that may arise from specific events or circumstances defined in the contract. An indemnification clause, also known as an indemnity clause or “hold harmless” provision, serves as a critical risk allocation … Read more
Exclusions are specific provisions within an insurance policy that eliminate or limit coverage for certain risks, hazards, circumstances, or property types that would otherwise be covered under the general terms of the policy. Exclusions form a critical component of any business insurance policy, serving to define the boundaries of coverage and clarify what the insurance … Read more
Risk-based capital (RBC) is a regulatory standard that determines the minimum amount of capital an insurance company must maintain based on its size and risk profile to ensure it can fulfill its financial obligations to policyholders. Risk-based capital refers to a method developed by the National Association of Insurance Commissioners (NAIC) to determine the minimum … Read more
Underwriting profit is the net profit an insurance company earns from its core insurance operations, calculated by subtracting paid claims and operating expenses from collected premiums, without including any investment income. Underwriting profit represents the fundamental profitability of an insurance company’s primary business activities. It measures how effectively an insurer evaluates risks, prices policies, and … Read more
Utmost Good Faith, also known by its Latin term “uberrima fidei,” is a fundamental legal doctrine that legally obliges all parties to an insurance contract to act with complete honesty and transparency, disclosing all material facts that could influence the decision to enter the contract. A ‘material fact’ is generally defined as information that would … Read more
A residual market is an insurance mechanism that serves as a coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers due to their high-risk profiles or other underwriting concerns. The residual market, also known as the assigned risk market, shared market, involuntary market or non-voluntary market, is … Read more
A per occurrence limit is the maximum amount an insurance company will pay for a single covered incident under the terms of your insurance policy. This is regardless of how many claims arise from that incident. The per occurrence limit represents a crucial component of liability insurance policies, establishing a clear boundary for financial protection. … Read more
A non-admitted insurance company is an insurer that is not licensed by a particular state’s department of insurance, but can still legally sell insurance policies through surplus lines brokers who have special licenses to place coverage with these carriers. Non-admitted insurers, also known as excess and surplus (E&S) lines carriers or surplus lines insurers, operate … Read more
A named insured is the person or business entity explicitly identified and listed by name on the declarations page of an insurance policy. The named insured serves as the primary policyholder with the most comprehensive rights and responsibilities under the policy, representing the individual or entity that owns the policy and has full rights to … Read more
A negligence clause is a contractual provision that allocates responsibility and potential liability between parties when one party fails to exercise reasonable care in performing their obligations. These clauses typically aim to limit financial exposure for errors or omissions while maintaining accountability for serious breaches of duty. Negligence forms a fundamental concept in American business … Read more
