The cause of a possible loss. For example, fire, theft, or hail.

The written contract of insurance.

The maximum amount a policy will pay, either overall or under a particular coverage.

Authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power.

The amount of money an insurance company charges for insurance coverage.

A policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

A person or organization whose obligation are guaranteed by a bond.

When the policy is terminated midterm by the insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is canceled after 40 days of coverage at the company’s election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.

Damage to another person’s property. The purpose of liability insurance is to cover property damage to a third party resulting from the negligent or intentional acts of an insured.