Insurance Glossary

An independent insurance agency is a licensed business entity that contracts with multiple insurance companies rather than working for just one. Because they represent multiple carriers, independent agents can compare policy terms, appetite, and premiums across several insurers on behalf of their clients.

A captive or exclusive agent represents a single insurance carrier exclusively (such as State Farm, Allstate, or Farmers). They write and service policies only issued by that parent company or its pre-approved affiliates and cannot place business with competing carriers.

Surplus lines refers to insurance coverage placed with specialized carriers for unusual, high-hazard, or unique exposures that admitted standard insurers decline to write. Surplus lines policies are accessed through licensed surplus lines brokers.

An admitted insurance company is officially licensed and approved by a state’s Department of Insurance. Admitted policies are backed by that state’s guaranty fund if the carrier becomes insolvent. A non-admitted (surplus lines) company is not subject to state rate-and-form filing requirements, granting them flexibility to insure complex risks without state guaranty fund backing.

An appointment is a formal, legally recorded contract filed with the state Department of Insurance between an insurance company and a licensed agent or agency authorizing that producer to act on the insurer’s behalf and bind coverage in that jurisdiction.

A binder is a temporary written agreement that provides immediate, legally binding insurance protection while the formal insurance policy application is processed and the permanent policy paperwork is issued by the carrier.

A deductible is the specified out-of-pocket amount the policyholder is contractually required to pay toward an insured loss before the insurance company pays the remainder of the covered claim. Deductibles can be a fixed dollar amount or a percentage of insured value.

The premium is the scheduled monetary amount paid periodically (monthly, quarterly, or annually) by the policyholder to keep an active insurance policy in legal force and avoid cancellation for non-payment.

A certificate of insurance is a standardized summary document issued by an agent or insurer verifying the existence of active coverage, effective dates, policy numbers, coverage limits, and named insured parties for contracts, leases, and client compliance.

An additional insured is a third party (such as a commercial landlord, general contractor, or client) added by endorsement to a policyholder’s liability coverage to receive direct defense and indemnification for claims arising from the named insured’s work.

The NAIC is the standard-setting and regulatory support organization created and governed by the chief insurance regulators from all 50 states, DC, and five US territories to coordinate statutory solvency standards and consumer protections.

Lines of authority (such as Property, Casualty, Life, Accident & Health, or Surplus Lines) designate the specific insurance categories that an individual producer or agency is legally licensed to market, solicit, and sell by their state Department of Insurance.

A wholesale insurance broker acts as an intermediary between retail insurance agents and specialty or surplus lines insurance carriers. Retail agents turn to wholesale brokers to place tough-to-insure risks that standard admitted markets decline.

A Managing General Agent is a specialized wholesale agency granted direct underwriting, pricing, and policy binding authority by an insurance company. MGAs perform carrier-like administrative functions for niche commercial programs without being an insurance carrier themselves.

The NFIP is a federal government program managed by FEMA that provides flood insurance protection to property owners, renters, and businesses in participating communities, administered locally through private insurance agencies.

Excess liability strictly extends higher financial dollar limits over an existing primary liability policy using the exact same terms. An umbrella policy also adds higher dollar limits, but can additionally drop down to provide broader coverage for certain liability exposures excluded by underlying policies.