Insurance Terminology

Replacement cost Building and Contents Insurance – Provides coverage against “all risk” of physical loss, subject to policy exclusions, without any sub-limits applying to the building, structural glass, signs or Association personal property, on a replacement cost valuation basis (i.e. the cost at the time of loss to replace with new property of like kind without depreciation).

Covered Property – This means that after a covered loss, the insurer will pay for the restoration of the building and any property included in the units and private storage areas which was initially installed in accordance with your Association’s original plans and specifications or replacement with like kind and quality.

Waiver of Subrogation – The insurance company waives its rights to subrogation against any unit owner.  This means that the unit owners cannot be sued by the insurance company for causing a loss.

Deductible – The deductible is the amount of claim that the insured is obligated to pay.  In the event of a loss occurs, only one deductible will be charged per occurrence, with the exception of ice damming where the deductible may apply per unit.

Natural Property – Covers, live trees, plants, shrubs and lawns.  Coverage is specifically limited to losses caused by fire, lightning, explosion vehicle, aircraft, riot, civil commotion, vandalism and theft.

Money & Securities – Covers destruction, disappearance or theft of money or securities from your Association premises or bank, or at the home of any bank messenger.

Personal Effects – Covers personal property on your person an owned by your Association directors, officers and employees while acting in the scope of their duties.

Personal Property of Others – Covers personal property of others in your care, custody or control.

Property Off Premises – Covers property while the property is temporarily at another location.

Property In Transit – Covers property while the property is being moved to another location.

Employee Dishonesty (Fidelity) – Covers dishonest acts by one or more employees acting alone or in collusion against theft of Association funds.  The employee dishonesty bond coverage is extended to include directors, officers, trustees, committee members and property managers in the definition of employee.

Depositors Forgery – Covers alterations or forgery of a check or draft drawn on the Associations accounts.

Maintenance Fees and Assessments – Pays for all maintenance fees and assessments due you from unit owners, following a covered loss, which you have been unable to collect due to a homeowners loss of use of the property during the period of restoration.

Valuable Papers & Records – Pays you for he cost of restoring your Association valuable papers and business records destroyed or damaged by a covered peril.  This would include resident lists and records, automobile titles and service records.

Ordinance or Law Coverage- A property endorsement which provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire.  These ordinance or law damages are normally excluded in standard property coverage forms.  The coverages available in this endorsement are cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.

Debris Removal – Pays to remove the debris of covered property that does not include any pollutants.

Fire department Service Charge – Covers your Association liability for fire department service charges when the fire department is called to save or protect property from a covered loss.

Limited Pollutant Cleanup and Removal – Pays the expense to cleanup and remove pollutants at your Association location if the release, discharge or dispersal of the pollutants is caused by or results from a covered loss.

Liability – Covers your Association liability for Bodily Injury and Property Damage.  Products liability and completed operations are also included.  There is no aggregate limit of liability for operations exposure.  The full limit is available for each claim.  Products and completed operations are subject to an aggregate limit.

Contractual Liability – Extends your coverage to liability assumed under contract, applies to both oral & written agreements relating to named insured’s business.

Personal Injury and Advertising Injury Liability – Personal Injury means injury other than bodily injury.  Coverage is provided for injury resulting from offenses such as false arrest, malicious prosecution, detention of imprisonment, the wrongful entry into, wrongful eviction from an other acts of invasion, or rights of private occupancy of a room.  Coverage for libel & slander is also provided in the policy.  Advertising Injury pays for damages done in the course of oral or written advertisement that disparages, libels or slanders a person’s organization’s goods, products or services.

Host Liquor Liability – Will defend or pay sums you are legally obligated to pay resulting from serving of liquor to someone who, while intoxicated, is in an accident and causes or receives injuries as a result of the alcohol consumed.

Fire Damage Legal Liability – Limit provides coverage for fire damage caused by negligence on the part of the insured to premises rented to the named insured.  If a fire occurs because of negligence of the insured and causes damage to property not rented to the insured, coverage would be provided under the occurrence limit.

Incidental Medical Malpractice – Extends “bodily injury” arising out of rendering or fail to render medical treatment on premises such as, for example, first-aid treatments, during the policy period.

Non-Owned Watercraft – covers operation of watercraft under 50 feet in length which the Association borrows, rents or charters – but do not own.

Additional Person Insured – Includes as insured; 1. Any spouse of a partner concerning business activities of the partnership and 2. Any employee of the named insured while acting within the scope of his or her duties.  Does not apply to bodily injury or personal injury sustained by a fellow employee, which occurs during the course of employment.

Extended Bodily Injury – Amends the definition of occurrence to; includes any intentional act by or at the direction of the insured, which results in bodily injury, but only is such bodily injury results from the use of “reasonable” force for purposes of protecting persons or property.

Newly Acquired Organizations – Provides automatic coverage up to 90 days for organization which the Association buys or establishes and which the Association is the owner or the majority stockholder, including limited liability companies.

Medical Payments – Pays the reasonable medical payments, without regard to fault, caused by an accident on your Association property, or the ways immediately adjoining it.

Provides coverage for elected or appointed individuals of an Association if they are sued by an Association member or third party alleging that a wrongful act was committed by the director or officer.  Extends coverage beyond protection for claims of bodily injury or property damage (covered by the general liability) into areas such as mismanagement of the Association.

Umbrella liability Insurance provides excess liability coverage over several of the insured’s primary liability policies.  Umbrella policies have three functions:

1. To provide additional limits above the Each Occurrence limit of the insured’s premium policies;

2. To take the place of primary insurance when primary aggregate limits are reduced or exhausted;

3. To provide broader coverage for some claims that would not be covered by the insured’s primary
insurance policies, which would be subject to the policy retention.

The words broker and agent are often interchanged when talking about insurance producers. The difference, however, is very important to people who purchase insurance products.

First, it is important to know that the insurance rates charged by companies are highly regulated. When you get a quote for a rate from any company, that is the approved rate that company is allowed to charge for that particular coverage by the Insurance Commissioner of your State. That company cannot quote a different rate for the exact same coverage.

If you go to two different agents who quote you different prices for the exact same policy – something is not right. Agents work on behalf of the insurance company. The same rate must be charged regardless of any costs a company may have in paying, training or commissions for that agent. Agents can only offer services from companies that they are appointed with and is paid directly by those companies.

Brokers are slightly different. Brokers do not work for an insurance company, they work for the customer. Brokers often do the exact same thing as an agent. They quote the rate to you and receive a commission from the insurance company. They can, however, charge a broker fee. In order to do so, they have to make the fee very clear to the customer. Broker fees cannot be lumped in with the quote as if it is premium being charged by the insurance company.

Even though brokers may charge fees, how much those fees are depends on the broker and your relationship. Usually, an insurance customer is better off working with a broker than an agent. Brokers have a much wider spectrum of insurers they deal with. They can purchase insurance for you from markets that are generally not available or insurers unwilling to pay the commissions your agent requires to place business.

A broker that is not receiving a commission on your premium is far more likely to help you keep your insurance costs down. If there is a broker fee involved, you will be notified about exactly how much that fee is. That fee may cost you less than working with an employee of the insurance companies.

Wholesale insurance brokers find specialized niche products to meet the unique needs of prospects.

Retail insurance agents meet countless clients and prospective clients regularly. Even independently licensed agents are often unable to extend their resources beyond a small handful of preferred insurance carriers, often remaining unaware of unique or specialized products. That’s where wholesale insurance brokers come in. Since they do not deal directly with the general public, but rather with the retail agents, they have time to research more carriers and learn new niche products, which they can present to retail agents to help meet their clients’ needs.

TRANSPARENCY

• When retail insurance agents exhaust their existing resources trying to locate policies to cover an unusual or unique client need, they contact wholesale brokers for assistance. The wholesale broker’s client is the retail agent, not the end consumer, which allows the agent to maintain the rapport and relationship already established.

TRANSPARENCY EXPERTISE

• Wholesale brokers focus their efforts on finding specialized insurance products from smaller and lesser-known carriers. The broker’s expertise is an awareness of existing niche policies and specific coverage products not offered by general insurance companies. When presented with a scenario where ordinary mainstream insurance products fail to meet coverage needs or with a prospect whose need is too complex or risky for traditional carriers, the wholesale broker’s knowledge of specialized niche policies becomes invaluable to the retail agent.

RESOURCES

• Wholesale insurance brokers maintain extensive databases of unique products offered by specialty carriers, many of whom do not even provide other ordinary insurance services. This list of smaller, relatively unknown insurance companies becomes a powerful resource for the broker, as he is able to contact multiple providers of niche products to further obtain the best possible policy and price for the retail agent’s client.

If you happen to be in a high-risk class for a certain type of insurance, you may find it hard to get coverage, let alone affordable coverage. It may involve shopping brokers to find one who has a policy that works for you or you can make things simple on yourself and find an independent agent who works with a wholesale insurance broker. Wholesale brokers represent multiple insurance companies and can usually find a policy that provides clients with affordable coverage.

BROKERS

• Traditional insurance agents typically have agreements with one insurance company to sell its products. If that insurance company doesn’t have an insurance policy that meets your needs, then the agent can’t help you. Independent agents represent multiple insurance companies because they work with wholesale insurance brokers. Wholesale insurance brokers work as an intermediary between the insurance companies and the traditional insurance agents to match an insurance policy with the agent’s customer’s needs.

SELECTION

• The biggest advantage to dealing with wholesale insurance is the selection. You can find a policy that meets your specific needs even if you are in a high-risk category. This is a switch from having to take something that is the best you can get because that particular company doesn’t offer what you need. Having a wider selection also increases customer satisfaction because they can get the policy they want.The biggest advantage to dealing with wholesale insurance is the selection. You can find a policy that meets your specific needs even if you are in a high-risk category. This is a switch from having to take something that is the best you can get because that particular company doesn’t offer what you need. Having a wider selection also increases customer satisfaction because they can get the policy they want.

LESS BIAS

• Because an independent agent is dealing with a wholesale broker and multiple insurance lines, the agent can be less biased in his assessment of the policies available. He is not forced to try and sell a policy that is not quite right, because he doesn’t work for just one insurance company that doesn’t offer anything else. Instead, he can help customers compare the benefits and drawbacks of each policy and company to make a better-informed decision

COST

• Wholesale insurance doesn’t cost the customer more. In fact, customers may get a better deal. Commissions on wholesale insurance are not increased because there are two agents selling the insurance. The policies all have a standard commission that is split between the wholesale insurance broker and the insurance agent. Also, with a wider selection of policies to choose from, customers often find the same coverage for a lower premium because the policies are offered by different companies

MGA stands for “managing general agent” and is a wholesale insurance intermediary with the authority to accept placements from (and often to appoint) retail agents on behalf of an insurer. MGAs generally provide underwriting and administrative services for the insurers they represent.

PURPOSE

• MGAs are often hired by insurance companies to manage their business in a specific territory. Sometimes referred to as wholesalers, MGAs do not compete with brokers and do not deal with clients. Rather, they are authorized to supply brokers with products.

SIGNIFICANCE

• MGAs usually market more unusual types of insurance coverage, for which specialized knowledge is required to underwrite policies. Insurers collaborate with MGAs because such expertise is not always available in-house and would be more costly to develop within the company.

TYPES

• An MGA can be used in any line of insurance for any form of insurer. According to the American Association of Managing General Agents, this includes insurers who are “admitted or not, direct or otherwise, broker or agent system, contract/appoint or open-broker subproduction, or any or all combination of these.”

COMPENSATION

• MGAs are generally entitled to a contingency commission, or override, on all business written within their territory. They will take a percentage of the commission that would otherwise go to the producing insurance agent.

CHALLENGES

• Being an MGA means personal accountability as well as responsibility for producers. MGAs take on the significant costs involved in being a wholesaler and the investment needed to succeed. They must function in many capacities including recruiting, training and motivating. They also must maintain their personal practice.