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Demystifying Risk Management Terminology: A Beginner's Guide

Angus Rhodes

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The terms and lingo often used by risk managers can be difficult to understand if you're foreign to the occupation. However, we've compiled some of the common terms and placed them into layman terms- so you can sound like a seasoned professional when communicating with your risk manager.

Here's a look at some of the terms you should know before you handle business with a risk manager.

ACV

ACV is short for "actual cash value". This term stands for the process of recovering and replacing lost or damaged property with lesser deprecation.

Admitted Carrier

An admitted carrier is an insurance agency that is licensed by the state in which you live. Admitted carriers are carriers that the state (your state) have monitored for sustainability, have been subjected to the state's regulations, and have been guaranteed by the state's fund.

Aggregate Limit

The aggregate limit is the maximum amount in which your insurer will pay under a liability policy throughout an annual period. This amount covers legal costs, but isn't hindered by the number of occurrences. In general liability situations, some policies are written with a set of aggregate limits that applies to certain scheduled locations.

Broker

A broker is the intermediary/insurance professional that markets and explains the insurance products to current or prospective insureds. The brokers themselves are normally licensed through the state, with their job revolving around the client's placement with an insurer (whether an organization or an individual.) The broker may work with a number of different agencies, as others may only represent one insurance company. A broker's main duty is to represent the client in their best interests.

Crime Coverage

Crime coverage is the package of certain policies that help protect the business/organization from intentional theft, whether it's by insiders or third parties. Another reason why crime coverage exists is to offer a small fidelity bond, as well as a small menu of other coverage for your business.

Deductible

A deductible is the amount subtracted from losses. This basically means that a deductible is the amount assumed - in advance - by the insured. This is required by an insurance company or used as the means for attaining a lower premium which pays for such coverage. This number also reflects the amount that the insured must pay.

Definitions

In the world of risk management, definitions are part of every single insurance policy. These definitions help explain the meanings behind the word. These are often found in bold printing or quotation marks in the context of insurance paperwork.

Fidelity Bond

A fidelity bond is a bond in which the employer is reimbursed. This bond is set to a stated amount beforehand, which can cover an instance whereas an employee is dishonorable - and costly - to a company. These instances are referred to as employee dishonesty coverage as well. If you happen to run a non-profit, a fidelity bond package is purchased as a stand alone form - or part of a package - of crime coverage.

So whether you speak with a risk manager or operate with a integrated risk management solution, you'll sound like a seasoned professional to keep conversation - and business - flowing efficiently.

 

RMIS Guide

May 29, 2015

 | Originally posted on 

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